Ok gang, I’m not very smart when it comes to stuff like this… but is life insurance counted as taxable income when the insurance company pays out??

Not in Iowa at least.

Can be in some states.
Some people set up irrevocable life insurance trusts for the proceeds/payouts to avoid some tax burden.
See a professional, a GOOD professional in your state for the correct answer.

Osky

No, life insurance typically is not taxable. Nor are gifted items or cash limits to a certain value in an annual period. According to my experience and having been the Administrator of my parents living Trust in the last several years. Beneficiaries pay no tax in Pa. At least in the type of trust they had set up. Inheritance tax is different matter. Most states this is considered taxable income.

From time to time Congress attempts to make the proceeds taxable on the Federal level. Be aware!

My wife's grandfather passed away some years ago and left his estate to her. He lived in California and yes California hit us up with a huge estate tax but being we lived in oregon we hired a lawyer and got out of paying it. I know that's not life insurance but I would sure check into it for your state law. There was no federal tax on the estate

The death benefit isn't usually taxable. On a whole life policy, the dividends are in most cases.

Just went thru this.

On two of my mothers policies I paid around 10%, these were annuity type life insurance policies and Nationwide withheld the tax. The other was mass mutual and they sent me the whole amount.

Pa. Is one of 6 states to levy an inheritance tax I found out. The rate for me was 4.5% of paid within 90 days, then it goes to 9.5%. This is on the estates worth.

https://www.revenue.pa.gov/TaxTypes/InheritanceTax/Pages/default.aspx

The premiums are not tax deductible and the income ore payout is not either as of yet. One reason why some families, people etc. use life insurance more as a way to avoid taxation then to make more income.

Bryce

Not in Indiana.

No sir not in Illinois

This explains it somewhat. Some parts are, depends on the type you have like I ran into.

https://www.thebalancemoney.com/do-beneficiaries-pay-taxes-on-life-insurance-policies-5079932

Might want to talk to a local financial/estate planner to give you some ideas/options

Yep!

I went to my accountant to find out why 2 were taxed and one wasn't.

To many types of insurance and states to give a stable answer here, best check with a knowledgeable finance counselor or tax lawyer.

Thanks gang