Is Life Insurance Taxed?

Good news if you just signed a life policy through Noveri Insurance Agency in Houston, TX: Life insurance payouts typically are not taxed.

This means that when your loved ones collect on your policy, they don’t need to add problems with the IRS to concerns surrounding your estate and funeral arrangements.

Life insurance payouts are not counted as gross income, so the payout itself is not taxed. However, interest is. This means that if you go with a policy that invests the money and pays your loved ones the proceeds, they will have a chunk taken out by the government. On the upside, they’re still going to be collecting less than they would with a conventional policy, but you can’t skip tax season when the insurance payout comes with interest.

Likewise, anyone using that money to make more money, putting their payout into stocks, crypto currency, small business, or similar, is going to have to pay all the associated taxes that come with that. If they buy a home with it, they still need to pay property taxes. If they go shopping, they still need to pay sales tax. The initial sum is the only part that is not, and the government will collect its share on any transaction made or interest earned.

By ensuring that you have a qualified legal team to handle your estate, you may be able to connect your family with a tax attorney who can help them to get a fair shake from the IRS. The initial payout, no matter what Houston, TX insurer you sign with through Noveri Insurance Agency, will not be taxed.