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If I cash in a whole life insurance policy, is that considered taxable income?

Public Comments

  1. no
  2. Not sure. Unless the money you invested was a tax deduction, then you already paid taxes on that amount. However, what about the interest it has earned? Call the insurance company to see if they send a 1099 form for cashing out the policy.
  3. Yes, at least part of it is. I cashed in a whole life policy this past year and my insurance company asked if I wanted to go ahead and take taxes out or wait. I chose to go ahead and take the taxes out so I wouldn't forget about it and have to fork it over this time year. In the letter I got accompanying my dividend check, it stated that about half of the dividend check should be reported as taxable income. Your agent should be able to help you out also.
  4. Only if you get more back, than you've paid in, in premiums. That would be your capital gain. I've never seen it happen that you get anywhere CLOSE to what you paid in. So likely, it's not going to be taxable. It's kinda like, buying stock at $100, selling for $10.
  5. Call the insurance company and ask them what, if any, "taxable gain" you have on your policy. If they tell you "none" and it is not owned in a qualified plan, then you do not have taxes due on surrender.
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