Is Term Life Insurance Tax Deductible?

Personal term life insurance premiums are NOT deductible on federal income taxes.

This applies to all individually-owned term life insurance policies, regardless of coverage amount or policy purpose.

Exception: Employer-paid group term life insurance coverage up to $50,000 per employee is deductible by the employer and excludable from employee taxable income.

Coverage above $50,000 creates imputed income taxable to the employee. For those researching related topics, life insurance premiums and life insurance payment deductibility follow the same rules regardless of policy type.

Term life insurance's tax advantage lies in the death benefit: proceeds paid to beneficiaries are generally income-tax-free under IRC Section 101(a).

This makes term life insurance an efficient, low-cost death benefit tool despite non-deductible premiums.

Policy premiums are paid with after-tax dollars, but benefits are received tax-free.

For long-term financial planning, term life insurance works best alongside tax-advantaged savings vehicles — such as a Roth IRA for tax-free retirement growth, or a traditional IRA for tax-deferred accumulation.

The life insurance provides the death benefit protection, while these accounts build retirement wealth.

Unlike permanent life insurance (whole life, universal life), term life has no cash value accumulation. The only tax advantage is the tax-free death benefit. Self-employed health insurance deductions do not extend to life insurance of any type.

Businesses cannot deduct premiums on key-man term life insurance policies where the business is the beneficiary.

If you're self-employed and exploring what IS deductible, health insurance premiums and dental insurance are legitimate above-the-line deductions — unlike life insurance of any kind.

For context on a single life insurance premium's deductibility, the answer is the same: not deductible.

Those seeking to maximize tax savings in financial planning should focus on 401(k) contributions.