This may be a first but I have a client who lost her husband this year and they had insurance that would pay the entire home mortgage on their personal residence. I have been searching the IRS website for the answer but cannot find what I want. Is this insurance payment taxable in anyway? I am assuming not, but would like to know from for sure. Thanks for your help.
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Life Insurance Proceeds
Isn't his just a life insurance policy that is directed to pay off the mortgage? There should be no taxable consequences if it is a personal policy.
Usually it is just better to purchase life insurance and you can do what you want with the proceeds. In this instance, the insurance was purchased to specifically pay off the mortgage. The disposition of the proceeds should not effect the taxability (non-taxablity) status of the proceeds I would guess.
Bob -
These are usually just life insurance policies on the deceased. It is not mortgage insurance. There may be taxable interest from date of death to payout. It is almost always tax-free. But it will depend on just exactly what kind of policy it was. These were sold in the past as "decreasing term insurance" which roughly covered the decreasing mortgage. However, they are paid to the beneficiary. What they do with the money is up to them.Comment
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