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Life Insurance & Disability Insurance Proceeds

Question: Are proceeds paid under a life insurance contract taxable and do I report this as income?

Answer:

  • Generally, if you receive the proceeds under a life insurance contract as a beneficiary due to the death of the insured person, the benefits are not includable in gross income and do not have to be reported.
  • Any interest you receive is taxable and you should report it just like any other interest received. See Topic 403 for more information about interest.
  • If the policy was transferred to you for cash or other valuable consideration, the exclusion for the proceeds is limited to the sum of the consideration you paid, additional premiums you paid, and certain other amounts. There are some exceptions to this rule. Taxable amounts generally are reportable based on the type of income document received, such as a Form 1099-INT (.pdf) or Form 1099-R (.pdf). For additional information, see Publication 525, Taxable and Nontaxable Income.

Category: Interest, Dividends, Other Types of Income
Subcategory: Life Insurance & Disability Insurance Proceeds

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224