Hello gndzeromyers,
I'm so happy you joined us today, and I am really sorry to hear about your loss.
For Federal, Life insurance proceeds are typically non taxable. Here is what the IRS Says:
- Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have to report them.
- However, any interest you receive is taxable and you should report it as interest received. See Topic 403 for more information about interest.
- If the policy was transferred to you for cash or other valuable consideration, the exclusion for the proceeds is limited to the sum of the consideration you paid, additional premiums you paid, and certain other amounts. There are some exceptions to this rule. Generally, you report the taxable amount based on the type of income document you receive, such as a Form 1099-INT or Form 1099-R. For additional information, see Publication 525, Taxable and Nontaxable Income and Are the Life Insurance Proceeds I Received Taxable?
Virginia states Under IRC § 101, life insurance benefit payments paid by reason of the death of the insured are exempt from federal taxation, and thus exempt from Virginia taxation.
Again, my sincerest condolences. Feel free to respond if you have any further questions.
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