What are the taxes when you cash in life insurance?

Answer by  tamarawilhite (17883)

Taxes will be owed on any interest paid for the policy or capital gains that have been paid on your premiums. The only exception will be if your family member has died; in which case, no taxes will be owed. You never owe taxes on the premiums that you paid in over the life of the policy.

Answer by  TaxGirl2008 (57)

When an individual cashes in a life insurance policy, they are taxed only on the amount of the proceeds that are more than the cost of the insurance policy. Costs of the policy include the total amount of premiums paid.