Are dividens for life insurance policies taxable?
I have several life insurance policies that I have been paying on for several years. I am interested in cashing in the dividends and spend the money to pay my credit card debt.
Will I have to pay income tax if I cash in the dividends or will I be able to receive the full amount of the dividends without having to figure a percentage off to pay income tax?
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Do I have to pay tax on life insurance dividends?
Generally life insurance dividends are tax free and you do not report them on your tax return. That?s because life insurance dividends are a return of premiums that you previously paid for the life insurance policy and the life insurance dividends reduce the cost of your life insurance policy and are not taxable on your tax return until they exceed the net premiums you paid for the life insurance policy. Life insurance dividends, and interest on the life insurance dividends, on Veterans life insurance are tax free and you do not report them on your tax return.
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Source: http://www.decadesilove.com/2012/07/24/are-dividens-for-life-insurance-policies-taxable-question/
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