Texas Statutes and Rules Common to Life and Health Insurance
Why are policy dividends from a participating Texas life policy generally not taxable income to the policyowner?
Answer and explanation
Answer: D. A policy dividend refunds premium that proved unnecessary, so it is a return of the owner's own money. It becomes taxable only when cumulative dividends exceed the premiums paid.Source: Internal Revenue Service — IRS Pub. 525, policy dividends as a return of premium
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