Surrendering Life Insurance Policy Tax Consequences at Life

Surrendering Life Insurance Policy Tax Consequences. There can be two tax implications on surrendering of life insurance policy or ulips. If you cash in a life insurance policy, you may need to pay tax on the cash surrender value.

What are the tax consequences of surrendering a life insurance policy? Tax rules on surrendering the life insurance policy the tax rules on surrendering the life insurance depend on the type of plan you hold. The taxpayer had the right to surrender the policy at any time and receive a distribution of the cash value less any outstanding debt, which could include capitalized interest.

1035 EXCHANGE / ROLLOVER / TRANSFER IRS has provided

New tax legislation for life insurance policies. On december 16, 2014, new life insurance policy exempt test legislation received royal assent. Surrendering a policy ends the life insurance coverage. The tax benefit on premiums paid in earlier years under section 80c can be reversed.