Urban Chicago
Established Member
Joined: Dec 23, 2010 9:21:48 GMT -5
Posts: 435
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Post by Urban Chicago on Jan 24, 2011 15:03:58 GMT -5
Hello All of you tax gurus.
I hope this is a quick question:
DH and I are considering cashing out his VUL life insurance policy. I'm pretty sure this is like a life insurance payout, and therefore not taxable income or gain.
Am I correct?
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cpadvisor
Junior Member
Joined: Jan 14, 2011 11:46:00 GMT -5
Posts: 143
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Post by cpadvisor on Jan 24, 2011 17:30:43 GMT -5
More like return of premiums.
Usually the "cash value" is less than what you've put in over the years. If that is the case, you don't have a gain/taxable event.
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mwcpa
Senior Member
Joined: Jan 7, 2011 6:35:43 GMT -5
Posts: 2,425
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Post by mwcpa on Jan 25, 2011 19:24:49 GMT -5
life insurance proceeds are generally tax free if they payout from the result of the insured passing away
cash in a life policy early and you are entering into a taxable transaction... any taxable income relates to the profits made inside the policy.... if you call the insurance company they can probably tell you how much would be taxable (or very close).
when I bought my home a number of years ago I had this whole life policy that I had for years... I needed the cash to help with the downpayment... I called the insurance company and asked how much was taxable... they told me approximately $25.00.... the 1099 came and it was pretty close....
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