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Llife insurance dividends used to reduce the premiums are not taxale, but what about those dividends used to buy more ins

Thiensville, WI |

The policy is paid up and new dividends are being used to purchase more insurance. Will those dividends ever be taxable

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Attorney answers 3


Generally speaking, life insurance dividends are not taxable until they equal the net you've paid in premium. Once you hit that point, then yes, they're taxable.

This answer does not constitute legal advice and does not establish an attorney-client relationship.

Kimberly Penix

Kimberly Penix


Sorry, but I am actually curious about this myself. What does that mean "equal the net you've paid in premium?" If you've paid X amount in premium, then the dividends aren't taxable until you are past X amount? Thanks! :)


I agree.

DISCLAIMER: David J. McCormick is licensed to practice law in the State of Wisconsin and this answer is being provided for informational purposes only because the laws of your jurisdiction may differ. This answer based on general legal principles and is not intended for the purpose of providing specific legal advice or opinions. Under no circumstances does this answer constitute the establishment of an attorney-client relationship.


Not until they exceed certain limits. Your Insurance Agent should be knowledgeable in this area, and while not a tax attorney, the company he represents likely has some on staff so get his take on the issues and if it doesn't make sense, you'll find plenty here who can do the same.

Good luck.

Evan A. Nielsen

1255 W. Colton Ave., #506 | Redlands, CA 92374
Main: 909.363.4658 | Fax: 480.304.3211

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Evan A. Nielsen is licensed to practice law in California. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.

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