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previous page Previous Page: Publication 17 - Your Federal Income Tax - Host or Hostess
next page Next Page: Publication 17 - Your Federal Income Tax - Partnership Income
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taxmap/pub17/p17-065.htm#en_us_publink100033029

Life Insurance Proceeds(p85)


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previous topic occurrence Life Insurance Proceeds next topic occurrence

Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract.
taxmap/pub17/p17-065.htm#en_us_publink100033030

Proceeds not received in installments.(p85)


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Proceeds not received in installments.

If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death.
taxmap/pub17/p17-065.htm#en_us_publink100033031

Proceeds received in installments.(p85)


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Proceeds received in installments.

If you receive life insurance proceeds in installments, you can exclude part of each installment from your income.
To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Include anything over this excluded part in your income as interest.
taxmap/pub17/p17-065.htm#en_us_publink100033032

Surviving spouse.(p85)
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If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. If you remarry, you can continue to take the exclusion.
taxmap/pub17/p17-065.htm#en_us_publink100033033

More information.(p85)


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For more information, see Life Insurance Proceeds in Publication 525.
taxmap/pub17/p17-065.htm#en_us_publink100033034

Surrender of policy for cash.(p85)


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Surrender of policy for cash.

If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income.
You should receive a Form 1099-R showing the total proceeds and the taxable part. Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A.
taxmap/pub17/p17-065.htm#en_us_publink100033035

Endowment Contract Proceeds(p85)


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previous topic occurrence Endowment Contract Proceeds next topic occurrence

An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Include the part of the lump sum payment that is more than your cost in your income.
taxmap/pub17/p17-065.htm#en_us_publink100033036

Accelerated Death Benefits(p85)


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previous topic occurrence Accelerated Death Benefits next topic occurrence

Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill.
taxmap/pub17/p17-065.htm#en_us_publink100033037

Viatical settlement.(p85)


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Viatical settlement.

This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code.
taxmap/pub17/p17-065.htm#en_us_publink100033038

Exclusion for terminal illness.(p85)


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Exclusion for terminal illness

Accelerated death benefits are fully excludable if the insured is a terminally ill individual. This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification.
taxmap/pub17/p17-065.htm#en_us_publink100033039

Exclusion for chronic illness.(p85)


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Exclusion for chronic illness.

If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525.
taxmap/pub17/p17-065.htm#en_us_publink100033040

Exception.(p86)


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previous topic occurrence Exception. next topic occurrence

The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured:
taxmap/pub17/p17-065.htm#en_us_publink100033041

Form 8853.(p86)


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previous topic occurrence Archer MSAs and Long-Term Care Insurance Contracts next topic occurrence

To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-term Care Insurance Contracts, with your return. You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred.
taxmap/pub17/p17-065.htm#en_us_publink100033042

Public Safety Officer Killed in the Line of Duty(p86)


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Public Safety Officer Killed in the Line of Duty

If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive.
For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. For more information, see Publication 559, Survivors, Executors, and Administrators.
previous pagePrevious Page: Publication 17 - Your Federal Income Tax - Host or Hostess
next pageNext Page: Publication 17 - Your Federal Income Tax - Partnership Income
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication