Are life insurance benefits taxable in North Carolina?

In North Carolina, life insurance benefits are generally not subject to state income taxes. This means that if a beneficiary receives a death benefit payout from a life insurance policy, they will not have to pay state taxes on that money. However, there are some exceptions to this rule. For example, if the policy owner and the insured person are different individuals and the policy is owned by a third party, the death benefit may be subject to North Carolina estate tax. Additionally, if the life insurance policy is paid out in installments or as an annuity, the portion of each payment that represents interest may be subject to state income tax. It's important to note that while life insurance benefits are generally not subject to North Carolina state income tax, they may be subject to federal income tax under certain circumstances. For example, if the policy was purchased with pre-tax dollars or if the death benefit is paid out in a lump sum and the amount exceeds the policy's face value, the excess amount may be subject to federal income tax. In summary, in North Carolina, life insurance benefits are generally not subject to state income taxes. However, there may be exceptions depending on the specific circumstances of the policy and payout. It's important to review the terms of the policy and consult with a tax professional if necessary to fully understand any tax implications of life insurance benefits.