Is Life Insurance Taxed In Texas? 
Life insurance in Texas is not taxed for income tax , in most situations . Life insurance proceeds do fall under the value of the estate if the policy owner is the deceased , and the one with the estate . If his/her spouse is no longer alive , federal estate taxes will be charged on the excess about the exempted amount , which is $ 5,250,000 in 2013 . Texas does not have a state estate tax at this time . 