Is VA Life Insurance Taxable? 
VA Life Insurance is not taxable , as long as the beneficiary of the policy is not the `` estate '' . When life insurance proceeds are left to the estate , they are taxable , whether issued by the Veterans Administration or from a private source . But life insurance proceeds left to a person or group do not generally incur income tax . VA Life Insurance is also subject to estate tax if the amount of the death benefit , added to the value of the estate , exceeds the exempted amount . Only the excess is taxed with estate taxes , and the federal exemption is 5.25 million this year . Some states have state estate -LRB- inheritance -RRB- taxes and some do n't . 