Federal Income Tax and Life Insurance Proceeds

After a loved one dies, filing the life insurance policy claim can be confusing and difficult but can relieve great financial burdens for the living family. Once the life insurance check comes, some may wonder if they have to pay federal taxes on the amount.

Generally, most life insurance proceeds are free from federal income tax. But, if one makes interest on the life insurance proceeds, that portion may be taxable. It is important to contact the life insurance company that issued the policy to see what taxes are due on the specific life insurance policy in question.