Life insurance proceeds that
are paid in a lump sump are not taxable unless the cost exceeds the premiums
that were paid. However, if the amounts were issued in installments, then
it is considered an annuity and is taxed as such.
Usually, to determine the
taxable portion of life insurance proceeds, you would take the total proceeds
minus any premiums, refunds, rebates, dividends, and/or unpaid loans that were
not included in your income. The difference will result in the taxable amount.
Please refer to the Internal Revenue
Service Publication 525, Taxable and Nontaxable Income, for further information. The
taxability of various life insurance disbursements begin on page 21 of the
publication.
To enter
the taxable amount:
- Type Form 1099-R
in Find or Search
- Click the Jump
to form 1099-R link
- Navigate through the
prompts to begin entering your information
- Your entries will help TurboTax determine any taxable amounts.
