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I received a death benefit from my fathers life insurance, less withholding, does this get claimed as income? It was used to pay for his funeral.

 
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MichaelMc
New Member

I received a death benefit from my fathers life insurance, less withholding, does this get claimed as income? It was used to pay for his funeral.

No, the death benefit paid to you by your father's life insurance is not taxable income, unless you were also paid interest.

The following guidance is provided from IRS Pub. 525 Taxable and Nontaxable Income:

"Life Insurance Proceeds

Life insurance proceeds paid to you because of the death of the insured person aren't taxable unless the policy was turned over to you for a price. This is true even if the proceeds were paid under an accident or health insurance pol­icy or an endowment contract. However, inter­est income received as a result of life insurance proceeds may be taxable.

Proceeds not received in installments. If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the in­sured person's death. If the benefit payable at death isn't specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death.

Proceeds received in installments. If you re­ceive life insurance proceeds in installments, you can exclude part of each installment from your income.

To determine the excluded part, divide the amount held by the insurance company (gener­ally the total lump sum payable at the death of the insured person) by the number of install­ments to be paid. Include anything over this ex­cluded part in your income as interest."

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