Life insurance proceeds are generally not taxable as income to the beneficiary. This means that if you receive a life insurance payout, you typically do not have to pay federal income tax on the proceeds. However, there are some situations where taxes may apply: 1. Interest Income: If the life insurance proceeds are paid out in installments and include interest, the interest portion may be taxable. 2. Estate Taxes: If the policyholder's estate is subject to estate taxes, the life insurance proceeds may be included in the taxable estate. 3. Surrendering a Policy: If you surrender a life insurance policy for cash value, any gain on the policy may be subject to income tax. It's important to consult with a tax professional or financial advisor to understand the specific tax implications of your life insurance policy based on your individual circumstances. Additionally, tax laws can change, so staying informed about current regulations is crucial for making informed financial decisions.