Life insurance matured endowment

[mollyanna58]

My father had a life insurance policy mature, and received a check for the payout. (It makes me feel like the Monopoly card, "Life insurance matures; collect $100.00 )

The check statement reads: $1,000.00 face amount of insurance

                                          6,131.75 paid-up additional insurance

                                               16.19 current dividend

                                             500.00 state tax withheld

                                          2,000.00 US income tax withheld

amount of check                 $4,648.44

Since state and federal taxes were withheld, I guess this is considered a taxable event.  But what is the taxable income?  The face amount?  Face amount plus additional paid up? 

To be clear, my father is still alive.  I guess he just lived longer than the policy could remain in effect.

[justme]

You should get a 1099-whatever it is for life insurance that lets you know. I got one when I cashed out my whole life. So if he got the check in 2015 he should get the information sometime this month. But just a stab I think it'd be 7,131.75 but don't quote me on that.

[TheOtherMe]

I received a 1099 when I cashed in my whole life insurance also.

Taxable will be paid up amount.  (maybe also dividend for the year).  If you subtract the withholding from the paid up amount, you should get the net.

[rangerj]

What Life Insurance companies generally call "dividends" are taxable interest income. The taxable amount is the amount over and above the cost basis, that is the amount paid for the policy. Were any of the "dividends" (interest income) reported and taxed in prior years? 1099s would have been issued for the amount of dividends for the tax year. Look at prior years tax records. What type of life insurance policy is involved, e.g. "whole life".

[mollyanna58]

Jan 12, 2016 22:11:08 GMT -5 rangerj said:

What Life Insurance companies generally call "dividends" are taxable interest income. The taxable amount is the amount over and above the cost basis, that is the amount paid for the policy. Were any of the "dividends" (interest income) reported and taxed in prior years? 1099s would have been issued for the amount of dividends for the tax year. Look at prior years tax records. What type of life insurance policy is involved, e.g. "whole life".

The policy says it's an endowment policy, with annual premiums of $14.79 per year for 72 years.  He was 13 when it was issued. No 1099s that I can find. However, I have a whole life policy with dividends, and have never received a 1099 on the annual dividend.