Are Life Insurance Proceeds Taxable In California? 
Life insurance proceeds in California are not taxable for by income tax , in most cases . If Life Insurance is left to the estate , or goes to the estate because all beneficiaries are deceased , then it will be charged income tax . Life insurance is subject to state and federal estate taxes when it exceeds the exemption . For federal estate taxes , the exemption is $ 5,250,000 in 2013 . 