Life insurance death benefits are generally not taxable at the federal level, as they are considered to be a form of inheritance rather than income. This means that beneficiaries typically do not have to report the death benefit as taxable income on their federal tax return. However, there are some exceptions and specific situations where life insurance proceeds may be subject to taxation. For example, if the policy was transferred for valuable consideration, such as a sale or exchange, the death benefit may be partially taxable. Additionally, if the policy was owned by a business and the proceeds are paid to the business, they may be subject to taxation. It's important to consult with a tax professional to understand the specific tax implications of life insurance death benefits in your individual circumstances. In summary, life insurance death benefits are usually not taxable at the federal level, but there are exceptions that may warrant further consideration and professional advice.