Do I need to pay taxes on income from my redeemed whole life insurance policy?

Question

Do I need to pay taxes on income from my redeemed whole life insurance policy?

Answer 1

Only if you have a capital gain.  That means, you get more out of it, than you've paid in, through the years.  I've never seen that happen, but it's theoretically possible.  

Then the amount of your GAIN, is subject to capital gains tax.

Answer 2

There could be tax consequences. For instance, if what you paid in premiums equals less than what is in cash value, then you will pay taxes on anything OVER the amount of premiums and is taxed at your normal tax rate.  If that is the case consider taking a loan out for whatever your reason for cancelling it in the first place.

Answer 3

Any money you receive above the basis is taxable. Your basis is the money you've paid in premiums. So any amount over what you paid is taxable.

Answer 4

As far as I know it is tax free. I guess you would have this policy for min of 3 years.

Thx

Answer 5

Typically wont happen since you end up putting in more after the insurance company takes out all of there fees for holding it for you.

However, if you have had the policy for a long period of time, it might happen.  They are designed that by age 100, the amount in the cash value portion equals the face amount.  Insurance company pays out less that way.