Life‑insurance proceeds are generally not taxable, so you record them on Form 1040 as a nontaxable receipt on line 4b, "Taxable amount" left blank, and attach a statement if required.
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Why the Proceeds Are Usually Nontaxable
Under IRC 101(a), a death benefit paid to a named beneficiary is excluded from gross income unless the policy was transferred for value or the proceeds include interest.
Where to Enter the Amount on Form 1040
Enter the total death benefit on line 4b of the 2023 Form 1040, which is designated for "Taxable amount – other income." Since the amount is nontaxable, you write "0" on line 4a (taxable portion) and list the full amount on line 4b with the word "nontaxable" in the margin or attach a brief statement.
When Interest Is Taxable
If the insurer holds the proceeds and pays interest, that interest is taxable and should be reported on line 2b (interest income). The principal remains nontaxable.
Documentation to Keep
Retain the insurer's Form 1099‑R (if issued), the death‑benefit statement, and any calculation showing why the amount is excluded. The IRS may request these during an audit.
Special Situations
When the policy was transferred for value, the entire benefit becomes taxable and is reported on line 8a (other income). In that case, the beneficiary must also file Schedule 1 to explain the inclusion.