Life insurance proceeds are generally not subject to income tax. The death benefit paid out to the beneficiary is typically tax-free. However, there are some exceptions to this rule. For example, if the policyholder sells their life insurance policy for a cash surrender value, any gain on the sale may be subject to income tax. Additionally, if the policyholder has taken out a loan against the cash value of their life insurance policy and the policy lapses or is surrendered, the amount of the loan that exceeds the policy's cost basis 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.