Life insurance proceeds are generally not subject to income tax. The Internal Revenue Service (IRS) considers life insurance to be a tax-free benefit, meaning that the death benefit paid out to the beneficiary is not considered taxable income. This applies to both term life insurance and permanent life insurance policies. However, there are a few exceptions to this general rule. If you surrender or sell a life insurance policy for cash value, any gain on the policy may be subject to income tax. Additionally, if you receive accelerated death benefits while you are still alive, the portion of the benefit that exceeds the premiums paid may be subject to income tax. It's important to consult with a tax professional or financial advisor for specific guidance on your individual situation.