Life insurance surrender

Forum|Forum|7 years ago
June 5, 2019
1 reply
62 views

I surrendered my life insurance policy. Got a check for 1745.36 but not a 1099

TurboTax Premier Online

Best answer by

For a policy on which you paid the premiums, taking the cash value of the policy is not taxable income.

The cash value of the policy is essentially the amount of premiums paid in excess of the cost of purchasing the policy, which is why it builds over time. As long as you (as opposed to an employer) paid the premiums, you are getting your own money back.

Anonymous

Answer

For a policy on which you paid the premiums, taking the cash value of the policy is not taxable income.

Gail7

Level 2

Hello,

I am trying to figure out my tax stuff early this year so can maybe do a doneradvisedfund.

Anyway, I was just reading your response to a question on life insurance and I am confused by the " statement of surrender" I received back in August.

It states that " the taxable gain amount is $2,238.46. So , is that considered a capital gain or ordinary income?

My proceeds were significantly larger as my father bought this policy for me in 1960! Need i say more?

Thank you!

Gael

dmertz

Level 15

The taxable gain on a surrender of an insurance policy is ordinary income, regardless of how the gain in the insurance plan came about. Near the end of January you'll receive a Form 1099-R with $2,238.46 in box 2a and code D along with code 7 in box 7 (or code 1 instead of code 7 if the contract was considered to be a modified endowment contract, which would make the gain subject to a 10% early-distribution penalty).