are life insurance premiums deductible
Internal Revenue Service (“IRS”) regulations specifically provide that “[p]remiums paid for life insurance by the insured are not deductible.” It is immaterial whether the premiums are paid by the insured or by some other person. Employees and Officers. Life insurance premiums paid by your company on policies where the life insured is an employee or an officer of the company, and where your company is not a direct or indirect beneficiary under the contract, are deductible. Premiums are not deductible regardless of whether the insurance is government life insurance or regular commercial life insurance. Although life insurance premiums, as such, are not deductible, they may be deductible as the payment of alimony or as charitable contributions. Employers who provide group term life insurance to workers may deduct premiums paid for that coverage if the company is not the beneficiary. The deductibility of group term life insurance premiums is limited to the cost for $50,000 of coverage. Compare Life Insurance Quotes. However, there is a problem with deducting life insurance premiums as expenses on your taxes. Because the death benefits of a policy are not taxable in most situations, the premiums are considered a personal expense and are not deductible for income tax purposes. Personal Expenses vs. Business Expenses. A: Yes. Any increment in the value of prepaid life insurance or annuity premiums or premium deposit funds constitutes taxable income in the year it is applied to the payment of a premium or is made available for withdrawal, whichever occurs first. In the event of the employee's death, the company receives the life insurance policy proceeds. Einsurance.com explains that, the premiums on a key man policy can declared as a tax deduction by the company, but only if those premiums are charged to the insured individual as taxable income.. Life insurance policy premiums do not typically qualify as eligible income tax deductions. However, in certain situations involving employee benefits and other corporate arrangements, some of the premiums paid may be tax deductible. A: Generally, no. An individual may take a gift tax deduction for the full value of gifts to qualified charities of life insurance and annuity contracts, and of premiums or consideration paid for such contracts owned by qualified charities. There are exceptions to this general rule. Personal expenses are not tax deductible, but business expenses are. If a business purchases the life insurance and is not the beneficiary of the policy payout, the premiums are tax deductible as a business expense. However, if the business is the beneficiary, such as in corporate-owned life insurance (COLI) or bank-owned life insurance (BOLI), the tax consequences may be different.
No