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Are life insurance premiums tax deductible?

Like your auto or home insurance premiums, life insurance premiums are generally not tax-deductible.

A couple works on taxes from their tablet and smartphone in the comfort of their kitchen.

Once you’ve decided to look into buying term life insurance, it’s natural to consider ways to leverage that purchase into a tax advantage. You might wonder whether life insurance premiums are tax-deductible. For most of us, the answer is no.

Life insurance premiums are not generally tax-deductible because IRS Pub. 502 considers those costs a “personal expense.” If you are looking for some wiggle room, you are not going to find it in Pub. 502, which states specifically that life insurance premiums are excluded as a deductible expense.

Notwithstanding the above, there are a few situations where premiums might be tax-deductible. If your premiums are associated with one of the categories below, check with your tax advisor for more information:

  • Life insurance purchased to secure alimony payments
  • Life insurance owned by a charity
  • Life insurance purchased by a business for its officers and employees, so long as the business is not a direct or indirect beneficiary

Are life insurance benefit payouts taxable?

Term life insurance proceeds are typically not taxable to your beneficiaries.

While life insurance benefit payouts are generally not taxable, in a few instances there may be tax ramifications for life insurance death benefits:

  • Earning interest on death benefits (this is typically simple interest from the date of the insured’s death until the date of payout and beneficiaries should receive a Form 1099-INT with the amount of the interest paid)
  • Utilizing an accelerated death benefit rider (this type of life insurance rider allows a terminally ill policyholder to access a portion of the policy’s benefits prior to death). Riders may be available at additional cost or may be included in the price of the policy, depending upon the policy’s provisions. Riders may have fees when exercised.
  • Triggering of the estate tax (the tax only applies when your estate is worth more than $11.2 million for an individual or $22.4 million for married couples, although that number is always subject to change as the nation’s tax laws change)

Why Haven Life?

The answer to that question is easy (which is exactly how Haven Life makes applying for term life insurance)

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How life insurance benefit payouts affect estate taxes

Estate taxation deserves a special callout. Keep in mind that when you choose to name your estate as your beneficiary on your life insurance policy, your loved ones may ultimately be subject to estate tax on everything in the estate, including the life insurance death benefit.

As you might guess, there are numerous tax strategies for avoiding or minimizing estate taxes (including transferring your policy to an irrevocable trust), so make sure to consult your tax advisor with questions.

No sales tax on life insurance premiums

While there is no tax deduction for life insurance premiums, you will not have to worry about paying sales tax on those premiums. Unlike other personal purchases such as clothing or video game consoles, the premium price will be the price you pay, with no sales tax.

Term life insurance is affordable even without a tax deduction

Regardless of tax considerations, term life insurance remains a valuable product to help financially protect your loved ones. And, this peace of mind can come at an affordable price. For instance, a 30-year old woman in excellent health could pay only $30.23 in monthly premiums for a 30-year, $500,000 Haven Term policy, issued by MassMutual. Easily get a ballpark idea of what your premiums might be for similar coverage using a price estimating tool.

Tax issues can be complicated, so it is always helpful to check in with your tax advisor for specifics regarding your personal situation.

Rachel Parisi is a freelance writer and attorney. She focuses her writing on insurance, financial services, and employee benefits. In her previous life, she served in the United States Air Force as a missile combat crew commander (think ‘WarGames’).

Haven Life Insurance Agency does not provide, nor is the information here written or intended as, specific tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.

Adam Weinberg

About Adam Weinberg

Adam Weinberg is the Brand Director for Haven Life, where he’s working hard to make life insurance easy. Adam is a creative problem solver who uses unique brand moments to create meaningful customer experiences.  Adam has more than a decade of diverse editorial, marketing, and branding experience, including work on several award-winning campaigns for various digital media companies.

Read more by Adam Weinberg

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus.html

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