When you surrender a life insurance policy, you need to report the taxable amount on your tax return. Since your premiums paid ($29,044) exceed the surrender value ($21,688.90), you likely won't have a taxable gain.
- Form 1099-R: The insurance company should have reported the gross distribution in Box 1 and the taxable amount in Box 2a. If Box 2a shows a taxable amount, it might be incorrect given your basis is higher than the distribution. Double-check with the issuer to ensure accuracy.
You can manually enter your 1099-R for life insurance in TurboTax. Here's how:
- TurboTax Online/Mobile:
- Be sure you are logged into TurboTax for Links to work
- Go to the 1099-R section.
- Check the taxable amount: If the taxable amount (surrender value less premiums) in Box 2a of your 1099-R is incorrect, request the issuer to provide a corrected 1099-R.
- Proceed through the questions and select Non-qualified plans include life insurance policies, private or purchased, commercial annuities, and military retirement plans - when prompted.
For more detailed information, you can refer to TurboTax's guide on reporting 1099-R and Is Life Insurance Taxable.
