FROM THE LEARNING CENTER
Is Life Insurance Tax Deductible?
by Bestow Team | September 06, 2022
2.5 Minute Read
If you found the infamous “that’s not a write-off” scene from Schitt’s Creek relatable, you are not alone. Sometimes it feels like the tax code is written in a different language.
For those who are curious whether or not you have to pay tax on life insurance or if your life insurance premiums are tax deductible, you’ve come to the right place.
Are Life Insurance Premiums Tax Deductible?
Is life insurance tax deductible? Typically, no — life insurance premium cannot be deducted from your federal tax return (dang it). But, on the bright side, life insurance premiums are not subject to sales tax.
Is Life Insurance Tax Deductible When it Is Considered a Business Expense?
Much like your gym membership, favorite pair of jeans, and weekly grocery bill, the IRS considers life insurance premiums a personal expense.
Okay, fair. But is life insurance tax deductible if the premiums are defined as a business expense? The IRS tax code 1.264-1 states that you cannot deduct the cost of life insurance coverage for yourself, an employee, or any person with a financial interest in your business if you are directly or indirectly the beneficiary of the policy.
When it comes to navigating the wonderful world of business tax write-offs, there are federal tax laws as well as state regulations to consider. If you have specific questions about your business and tax on life insurance, it’s a good idea to consult with a tax advisor or an accountant.
Do You Pay Tax on Life Insurance?
You know that slightly disappointing feeling you get when you add to cart and see your total cost increase because of sales tax? With life insurance, you don’t have to worry about that — life insurance is not subject to sales tax.
However, there could be income tax on life insurance. For example, if your employer pays for your life insurance coverage and the coverage amount is over $50,000, the premium they pay to cover anything over $50,000 is typically considered taxable income on your end.
Term Life Insurance, Simplified
While taxes and business write-offs can be complicated, life insurance doesn’t have to be. Bestow makes applying for term life insurance simple, quick, and stress-free. Fill out a 100% online application in minutes and get a same-day decision. No hoops, no hurdles. No medical exam. Just you, your computer (or tablet, or phone), and a few clicks.
With rates starting under $1 per day and available coverage up to $1.5 million, Bestow can help give you and your loved ones some peace of mind. Start with a free quote and cross this very important item off your to-do list.
Bestow does not give tax or legal advice. The information provided is not intended to offer any tax, legal or financial advice. It is always a good idea to consult your tax, legal and financial advisors regarding your specific situation.