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I am going to surrended my life insurance policy I will receive…

Customer Question
I am going to surrended...
I am going to surrended my life insurance policy I will receive $776.42.
what taxes will be due on this at the state and federal level
The death benefit is $6974.20 There is a loan on it for $3000.00.
Do thks to pay for expensive medical treatment.
Submitted: 3 years ago.Category: Tax
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Answered in 9 minutes by:
6/22/2015
Tax Professional: Robin D., Senior Tax Advisor 4 replied 3 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,390
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello,When you surrender a life insurance policy you generally pay tax on the portion you receive that is greater than the premiums you have paid.Your taxable amount will depend on how much in premiums you have paid. You have a life insurance policy with a cash surrender value of $7000. You have an outstanding policy loan of $3000. There have been no distributions from the policy. You surrender the policy to the insurer cash. You have taxable ordinary income of cash + loan - premiums. You did not state the premiums paid (or your other income for the year) but you can plug in the numbers into the equation above. The result will be added to your other income and taxed at your regular rate.
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