Yes, you are correct. Accelerated death benefits paid to a terminally ill insured (with a physician’s certificate showing a reasonable expectation of death within 24 months) is not taxable. Accelerated death benefits used for a chronically ill insured’s long-term care services are also not taxable. Amounts in excess of the policy holder’s total investment are taxable.
The 1099-R that you received is correct.
To enter this:
- Open Turbo Tax.
- In the Search box type 1099-R.
- Click on Jump to.
- Enter your 1099-R as it appears on your form, in Box 2 enter zero.
- Continue to answer through the questions.
