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ryanmesa
New Member

Do i have to claim a life insurance policy cash out?

I cashed out a life insurance policy do i have to claim it?
1 Best answer

Accepted Solutions
bwa
Alumni
Alumni

Do i have to claim a life insurance policy cash out?

If you cash in a life insurance policy you may have taxable income. The taxable income would be -

  • the cash surrender value that you received (including any amount not received due to a loan on the policy), minus
  • premiums paid over the life of the policy. On a mutual policy, premiums are net of participating dividends.

Generally, this only results in income on older policies. Your insurance company should send you a Form 1099-R for the income to report.


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5 Replies
bwa
Alumni
Alumni

Do i have to claim a life insurance policy cash out?

If you cash in a life insurance policy you may have taxable income. The taxable income would be -

  • the cash surrender value that you received (including any amount not received due to a loan on the policy), minus
  • premiums paid over the life of the policy. On a mutual policy, premiums are net of participating dividends.

Generally, this only results in income on older policies. Your insurance company should send you a Form 1099-R for the income to report.


hardee40
New Member

Do i have to claim a life insurance policy cash out?

What if i did not get 1099r
khende
Level 1

Do i have to claim a life insurance policy cash out?

We received a life insurance distribution and Turbo Tax is considering the full amount of the gross distribution as income though there is a taxable amount and taxes withheld listed in the 1099-R.  This doesn't see right?  

JohnB5677
Expert Alumni

Do i have to claim a life insurance policy cash out?

Something does not seem correct.  

 

Please clarify what is on the 1099-R.

  • Is there a value in both boxes 1 and 2a?
  • What is the code in Box 7?

Also, please go through the interview, and if you are not sure of a question add it to your posting.

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khende
Level 1

Do i have to claim a life insurance policy cash out?

Thank you for your prompt response 🙂 I figured it out!  Turbo Tax is adding the gross distribution to my total income, but is not calculating the full distribution within the taxable amount of our total income.  I was looking the federal review page and not the actual form.  Just to answer your questions yes there is a value in boxes 1 and 2 as well as federal income taxes were withheld.  Box 7 has code 7, normal distribution.  

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