Taxable?

[DonB]

California

Currently my wife and I have two life insurance policies, her $50K and mine is $250K. Each has a savings/investment component and on mine I receive a small dividend check quarterly. The amounts above face value of policy is about $6K for my wife’s and about $40K for mine. We have been considering canceling the policies and taking the cash. The question is would that money be taxable? I thank you all in advance for your time and responses.

 

[Taxing Matters]

Without reading the details of your policies and knowing what exactly the payments you receive are for all I can tell you is that in general returns from investments in a whole life or other investment plan in an insurance policy are taxable to you and included in your federal and California income. Death benefits paid are not taxable to the beneficiary, but the rest that you get from these kinds of products typically are taxable. The IRS has an online tool to help you determine what benefits are taxable.