Taxable income

Forum|Forum|4 years ago
February 3, 2022
3 replies
0 views

I received a check from a class action suit brought against USAA Life Insurance Co charging that they illegally manipulate their rates in Washington State and I received $1869.52. They gave no tax advise other than talk to a tax adviser. Do I need to report this and if so on what form. The sum would represent overpayment of my insurance premiums but I don't know over what time period they calculated this amount

Tax Advice

Bsch4477

Level 15

Sounds like a return of premium which isn’t taxed. If you received no tax form do not report it.

Cynthiad66

Level 14

@pmobgyn - proceeds from a lawsuit for life insurance premiums are not taxable. However, if the settlement includes interest due to the late payment, that would be taxable. You would report the interest earned as Interest Income.

You did not say whether the premiums are health or life insurance because health insurance premiums if deducted previously might require other tax adjustments.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

DaveF1006

Level 15

It depends. To clarify, when did you receive this check? Was this in 2021?

[ Edited 02/02/22|05:15 PM PST]

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

pmobgynAuthor

Level 2

I received the check in 2021

Opus 17

Level 15

If you paid the premiums out of pocket (after tax) then the settlement is not taxable unless it is more than the premiums you paid.

If you paid pre-tax premiums (such as workplace medical insurance) then the check is taxable income because it is a return of money you didn't pay tax on before.

If you paid premiums out of pocket and then claimed a tax deduction as a medical expense or used an HSA to pay the premiums (maybe for long term health insurance), the check may be taxable as a return of a previous tax deduction, but we would need more information.