Life insurance policy loans are generally not taxable in the year taken and not deductible in the year repaid.

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Life insurance policy loans are generally considered to be a tax-free distribution of funds, meaning that they are not taxable in the year that they are taken out. However, the amount of the loan is still considered to be part of the policyholder's overall death benefit, so it may be subject to estate tax if it is not repaid before the policyholder passes away. In addition, policy loans are not deductible in the year that they are repaid, as they are considered to be a return of the policyholder's own funds rather than a true expense.

Life Insurance Policy Loans Are Generally Not Taxable in the Year