Foreign Insurance Endowment payment

[PattiD65]

My $10,000 life policy in Canada became paid up in 2021.  I received a pure endowment payment of $3,110.  From this payment 50% Canadian tax was deducted of $1,555.  

I have always claimed the income from this insurance as arms length interest payments on my taxes.  

My premiums over the years totaled $7,717.50

How do I claim the endowment on my 2021 taxes or do I claim it because I have paid tax on the interest over the years.

[DaveF1006 · Accepted solution]

According to IRS  publication 554, Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy.  In this case, your premiums of $7717.50 exceeded the payout amount of $3110 so this is not taxable income to you.

Since this is not taxable income, you cannot claim a foreign tax credit for the income taxes you paid to Canada on this endowment.

[PattiD65]

DaveF1006 thank you for your reply. It's what I suspected and I wished that I could claim the foreign tax paid. But, oh well, at least I don't have to claim it as income.