I have a policy that I have paid taxes on the dividends & interest for years. It has a cash value now. When I cash it in do I have to pay taxes on it again?
2007-02-28 17:04:34 · 3 answers · asked by sqeker48 3 in Business & Finance ➔ Taxes ➔ United States
You should not have paid taxes on the dividends. Dividends on life insurance are not taxable, only the interest earned by the dividends are taxable.
You will receive a 1099R from the insurance company, showing the distribution and the taxable amount. You will need to pay taxes on the amount indicated as taxable on the 1099R. It may or may not be zero depending on the type of policy.
2007-03-01 02:26:35 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
The cash value will be less than what you've paid in plus the interest and dividends that you've already paid taxes on, so no.
2007-03-01 02:52:07 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
If you are cashing the policy in early, you can deduct the amount you payed for it from the dollar amount you get from the policy but then you have to claim the difference. Example, you paid $200 for a policy you cashed it in early and received a $1000 you would have to claim an income of $800 from that policy.
2007-03-01 01:12:37 · answer #3 · answered by Antoinette O 2 · 0⤊ 2⤋