How Much Is Life Insurance Taxed? 
Life insurance proceeds paid to a beneficiary are not charged income tax in the United States . If the beneficiary chooses to take the death benefit on a payment plan , the insurance company will pay interest to the beneficiary on the amount that has not yet been paid out . Taxes must be paid just on the interest . Inheritance or estate taxes are charged when the proceeds from the life insurance policy bring the estate over a certain dollar amount . In 2014 , this exempted amount is over $ 5,000,000 on the federal level . So most estates do not pay estate tax , but when they do , here is a calculator that can help you assess the taxes : WEBSITELINK 