Life insurance death benefits are not subject to income taxes.

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Life insurance death benefits are generally not subject to income taxes for the beneficiary. However, if the death benefit is paid in installments with interest, the interest portion may be taxable. Additionally, if the policy was transferred for value (i.e. sold to someone else), then the death benefit may be partially taxable. It is important to note that estate taxes may apply if the total value of the decedent's estate exceeds certain thresholds.

Life Insurance Death Benefits Are Not Subject to Income Taxes