Question

I’m the beneficiary of an insurance payout on the death of a relative — Is a life insurance payout taxable?

Answer

Regarding your question: Is life insurance payout taxable income, no, the IRS does not consider life insurance payouts taxable income.

However, life insurance payout taxable interest issues might arise if you earn interest on the payouts after the relative dies. If so, you’ll need to report this as taxable interest on your return.

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