Life Insurance Taxation Washington WA
Reader’s Question:
If I get a life insurance policy with a cash-value feature, will the state of Washington still tax me if I decide to cash-out my life insurance policy?
Wayne
Bellingham, WA
Very interesting question you got there. Reading your copy of the life insurance policy’s terms of agreement or contacting you life insurance provider there in Washington directly should be able to clarify this issue quickly but let us give some examples to better clarify your concern.
” If you cashed-in or cashed-out your policy and you got less than or equal sum of money as you have paid the life insurance provider as premiums then this amount should not be taxed since it is not considered an “income”.
” If you cashed-in or cashed-out your policy and you are awarded with a sum greater than what you paid the life insurance company, then your gain should be taxable since it would be considered as a form of income by the state or government.
” Tax would also be applicable if you surrender your life insurance policy and is provided a modified endowment, or if you borrowed against or took out loans on the cash-value of your life insurance policy.
” Interest or dividends earned by your policy’s cash-value amount would also be taxable but only once it is granted to you or your beneficiaries, if the money is just accumulating within the policy, or otherwise not being externally used, it would be tax-deferred.
Again, it would be best to consult your life insurance provider the verify your agreement with them accurately.
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