Whenever someone who held an active life insurance policy passes away, the person who is listed as the beneficiary is required to file a claim in order to receive the money associated with the late individual’s policy. Many people wonder if this income is required to be reported to the IRS during tax season. Fortunately, the IRS has declared that most life insurance policies do not have to be claimed as a part of the person’s overall gross income at the end of the year.
- Life insurance payouts are usually not taxable, but sometimes they are.
- Sometimes life insurance money is taxable when there is an estate involved.
- Interest earned on life insurance money can often be taxable.
“In most cases, life insurance payouts are not taxable, which is a huge benefit.”