If there is one thing that the Internal Revenue Service is clear about, it’s that any financial gain considered income is taxable. And depending on the circumstances for someone in Johnstown, PA or elsewhere, some types of insurance coverage payouts fall into that category. The issue has to do with what is considered a replacement of what was already owned versus what is a gain. In the case of life insurance, the coverage is a gray area because what’s being replaced is the potential income earning capability or financial stability of a person who has passed away, not necessarily a gain per se.
According to the IRS, life insurance benefits for a death are not taxable. However, where money was saved in some plans, the interest gained over time by the policy is considered taxable income to the beneficiary. This can easily happen in life insurance plans with a savings account component in addition to the basic insurance coverage. Topic 403 Publication from the IRS covers the matter in more detail, but it won’t be exactly clear on which plan type will play out a certain way for a given consumer in Pennsylvania.
That’s where help from Asset Planning Insurance Agency, LLC becomes essential. The experts here can go through the mechanics of each insurance plan type, point out what would actually earn interest versus be a straight benefit, and then apply the probable results to a consumer’s specific situation. So if you want to make sure that you have a financial safety net for loved ones, but you also want to make sure you avoid leaving any tax surprises for them, a good discussion with the folks at Asset Planning Insurance Agency, LLC in Johnstown, PA may be worth your time.