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Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  3+ decades of varied tax industry exp. Tax Biz owner
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My wife just passed away and I am the beneficiary of her life

Resolved Question:

My wife just passed away and I am the beneficiary of her life insurance policies.
One friend tells me that the insurance payoff is taxable and I need to set up charitable donations (since I'm giving away her clothing, etc. to Goodwill and the like) so as to shelter as much of the lump sum payout as possible.
Another friend says lump sum life insurance payouts are not taxed, and also warned me if my donation amount is over $1000 it tends to get flagged for an audit. Can you straighten this out for me?
Submitted: 4 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 4 years ago.
Welcome, THANK YOU for using Just Answer. My goal is to help make your life...a little...LESS taxing.

I'm sorry about the passing of your wife. In brief, the following applies.

Generally, if you receive the proceeds under a life insurance contract because of the death of the insured person, the benefits are not includable in gross income and do not have to be reported:

Any interest you receive would be taxable and would need to be reported just like any other interest received.

If the policy was transferred to you for cash or other valuable consideration, the exclusion for the proceeds is limited to the sum of the consideration you paid, additional premiums you paid, and certain other amounts.

There are some exceptions to this rule.

In regards XXXXX XXXXX her items to charity, there is nothing special that you need to set up to do that, you can just give the items to charity as you would any other donations.

Please let me know if I can be of further assistance to you regarding this matter.

Thank you again for using JUST ANSWER.
Tax.appeal.168 and 4 other Tax Specialists are ready to help you
Expert:  Tax.appeal.168 replied 4 years ago.
Hello again,

Thank you for the accept. You may find the following information beneficial regarding giving your wife's personal items to charity.

Rules for Clothing and Household Items

To be deductible, clothing and household items donated to charity after Aug. 17, 2006, must be in good used condition or better. However, a taxpayer may claim a deduction of more than $500 for any single item, regardless of its condition, if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.


Thank you again for the accept and for using JUST ANSWER.

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