Is Life Insurance Taxed In Massachusetts? 
Life insurance in Massachusetts is exempt from income tax in most situations . If the death benefit is paid to the beneficiary in installments , the interest earned is subject to income tax . If the death benefit has interest earnings in addition to the face amount , the interest may be taxed . And if the face amount is cashed in before death , there are some tax implications for the policy owner . Aside from that , however , life insurance is not charged income tax as long as the beneficiary is a person , trust , or other entity.To avoid paying income tax , do not make the beneficiary the estate . 