Is Life Insurance Taxed In North Carolina? 
Life insurance in North Carolina is not charged income tax , in most situations . Life insurance is income tax free , but does incur estate taxes if the life insurance proceeds bump the estate to over the exempted limit . Then the amount of the estate over the exempted amount is charged estate tax . Interest on life insurance payments taken in installments , or the amount of the death benefit over the face amount , can also be taxed . 