Love Insurance Adviser,

I had a restaurant in New Jersey that was flooded in 2011 by Hurricane Irene. We had flood insurance, and the insurance paid $100,000 for the harm. We were told we could use the money to fix it or not, at our discretion. But my tax accountant said we might have to report the payout as income on our taxes. Is that right?

-Richard

Dear Insurance Adviser,

Exercise I have to claim a settlement from a dwelling insurance policy on my taxes? A customer hurt me while adding on to his house.

-Daniel

Love Insurance Adviser,

My female parent is 94 years old, and she can no longer pay the premium on her life insurance. She canceled the policy and received around $v,000. Does she need to file income tax on that money?

-Ron

Honey Guys,

Equally a general dominion, proceeds from insurance policies are not subject to income taxation. But always check with your tax accountant to be sure you lot don't owe anything.

So, when you receive a $10,000 check to repair your car following an accident, information technology's tax-free. Richard, when you receive a $100,000 check for flood damage to your dwelling, that'southward usually tax-free also. Even if you don't spend all the insurance coin to repair the home, any is left over represents personal property that you lot didn't supplant, or a damaged expanse of the construction that y'all did non repair. Yous wouldn't owe whatever tax on that money.

Even awards from personal injury lawsuits are revenue enhancement-gratuitous. When you lot are injured and collect compensation from a negligent homeowner, as Daniel did, those proceeds come taxation-free.

Expiry benefits from individual life insurance policies are usually tax-free. Even greenbacks value received from liquidated whole life insurance policies, such equally the $5,000 Ron's 94-yr-quondam mother received, is tax-gratis. The just exception would be if at that place was a financial gain, meaning the cash value exceeded the premiums paid. Nonetheless, I suspect Ron's female parent paid much more than $5,000 in premiums to the insurance company.

Health insurance benefits, whether paid for individually or past one'southward employer, are e'er income-tax-gratis. So are benefits paid from long-term care insurance.

Nearly the merely times when insurance is not gratuitous of income tax are when you lot receive group inability insurance benefits, such as from your employer, or when life insurance paid for by your employer exceeds $50,000 in coverage. Nongroup disability insurance that you pay for yourself is entitled to tax-gratuitous benefits.

Again, these are some general rules. Call up to cheque with your revenue enhancement accountant for your specific state of affairs.

All the best.

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