Is a car insurance payout for a death taxable income?

[Mar]

My husband was hit by a car and killed in 2019.  The driver was never identified and my car insurance covered the death (under the uninsured/underinsured driver) even though my husband was a pedestrian and our vehicle was not involved in the accident. The insurance settlement was paid to me in 2020.  Is this considered taxable income? How do I report it?

[ErnieS0]

Probably not. Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person aren't includable in gross income and you don't have to report them. However, any interest you receive is taxable and you should report it as interest received.

Watch for tax documents. Any taxable proceeds from life insurance will be reported on Form 1099-R. Your settlement should not be taxable so you should not receive such a form. Taxable interest on the policy would be reported on Form 1099-INT.

Your insurance company has until January 31 to send of these forms. You probably will not receive these forms. Most likely nothing is taxable. You can call your insurance company to find out if they are planning to send you any tax forms.

Learn more at Life Insurance & Disability Insurance Proceeds.