Is Life Insurance Taxed In Michigan? 
Life insurance in Michigan is not charged income tax to the beneficiary , except when there is interest on the money -LRB- e.g. when the death benefit is not taken in a lump sum , but in regular payments , income tax is charged on just the interest -RRB- , or some other anomalies . Federal Estate taxes will apply if the amount of the life insurance is over 5.25 M and the spouse is no longer alive . Michigan does not have a state estate tax at this time . 