The bottom line The tax treatment of life insurance proceeds used to redeem company shares usually separates income tax from estate tax: death proceeds are generally excluded from gross income, but policy ownership, redemption terms, and company valuation can affect the estate. IRC §§101(a), 2042, and 302 answer different questions, so one rule does not … Read more

The bottom line Is a life insurance loan taxable? Usually not while a non-MEC permanent policy stays in force, but a lapse or surrender can create taxable income to the extent policy proceeds exceed your basis. Read the policy’s loan terms and ask a tax adviser before changing coverage. A policy loan is money borrowed … Read more

The bottom line Are grandchild life insurance gifts taxable? Paying premiums on a policy you own usually is not a gift to the grandchild. Transferring ownership, paying premiums on a policy the grandchild owns, or using a trust can create gift-tax reporting questions. Are grandchild life insurance gifts taxable? Usually, the answer depends on who … Read more

The bottom line Are cash surrender proceeds taxable? Usually, yes: a life insurance policy surrender is taxable only to the extent the amount treated as proceeds exceeds your investment in the contract. The taxable gain is included in income, while a modified endowment contract can trigger different distribution and penalty rules. Check the policy records … Read more

The bottom line Key person life insurance tax treatment basics depend on who owns the policy and receives its proceeds. A business generally cannot deduct premiums when it is directly or indirectly the beneficiary, while death proceeds are generally excluded from income. Employer-owned coverage, transfers, interest, and policy transactions can change the result. Have a … Read more

The bottom line Are life insurance loans taxable? Usually not while a non-MEC policy remains in force: the loan is generally not current income under Internal Revenue Code section 72. Tax can arise when the policy lapses or is surrendered with debt, because the amount above adjusted basis may be taxable. A policy loan is … Read more

The bottom line If you are asking, “is naming a charity on a life insurance policy tax deductible,” the answer depends on the arrangement. Naming a charity as beneficiary usually does not create a current income tax deduction for your premiums. Transferring the policy to a qualified charity may create a charitable contribution deduction, while … Read more

The bottom line c corporation alternative minimum tax and company-owned life insurance proceeds are usually separate questions: the 15% corporate AMT applies to applicable large corporations, while death benefits often qualify for exclusion under IRC §101(a), subject to employer-owned-policy rules in §101(j) and the corporation’s financial-statement treatment. For a business owner, the practical question is … Read more