Do you have to pay tax on insurance money?

Discussion in 'After Hours Lounge (Off Topic)' started by DustinLC, Jul 2, 2003.

  1. DustinLC

    DustinLC Supporting Actor

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    In this case, I got 11K for my destroyed car in an auto accident. I suspect I have to pay tax on it at the end of the year but keep on wondering why?

    For example, if I die and my wife gets 300K, she's not getting that much is she? If that money is subject to tax?
     
  2. Bill_D

    Bill_D Supporting Actor

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    no, you don't have to pay tax on insurance money.

    Your wife and her new man would enjoy every penny of that $300K as well. Stick around! I'm not quite sure of the current statutes set by Congress, but I believe the tax-free ceiling on inheritance was $650K and I think Congress has jacked it up even more now.
     
  3. Philip_G

    Philip_G Producer

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    correct, no tax. you also should get a statement from the insurance company saying the vehicle was totaled (at least in states I've lived) so you don't have to pay sales tax on the next car you buy, or at least 11k worth of that car.
     
  4. Eric_L

    Eric_L Screenwriter

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    The tax-free estate exemption will grow to infinity in a few years, however, if your wife owns the life insurance (rather than in your name) then there is NO LIMIT to the size of the policy pay out that she can receive tax free.

    As far as insurance settlements, if the settlement is for back wages you will pay tax. Punitive damages way also be taxed - I'm not sure. Compensatory damages are tax free.
     

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