In general, life insurance proceeds are not subject to income tax. The Internal Revenue Service (IRS) considers life insurance death benefits to be tax-free. This means that if you receive a payout from a life insurance policy due to the death of the insured person, you do not have to report it as income on your federal tax return. However, there are a few exceptions to this rule. If you receive interest or other income from the life insurance proceeds, that portion may be subject to income tax. Additionally, if you sell or surrender a life insurance policy for cash value, any gain on the policy may be taxable. It's important to consult with a tax professional or refer to IRS guidelines for specific situations and to determine if any taxes are owed on your life insurance proceeds.