1. Mark TaylorPRO
    Licensed Life Agent, Life and Finance/ 50 States, New York
    A Life Insurance payout is technically income, however, Life Insurance is not taxable, and is paid out in lump sum. 

    Other policies that are paid out to beneficiaries may be Annuities which are taxable as ordinary income as with all payments when the annuities reach maturity.
    Answered on December 12, 2013
  2. Peggy MacePRO
    COO and Senior Agent, Outlook Life, All 50 States
    Life insurance payouts are usually considered unearned income. As such, a life insurance payout is not subject to income tax. The new 3.8% Medicare tax on unearned income excludes life insurance cash value. The Medicare tax also excludes life insurance proceeds that are not subject to income tax.
    Answered on December 12, 2013
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