The general rule is that premium payments for life insurance policies are not deductible for federal income tax purposes. This rule generally applies regardless of who owns the policy or whether it is used for personal or business purposes. However, in certain situations life insurance premiums may be deductible. In these situations, the premiums are deductible because they also fit the definition of some other type of deductible expense, not because they are premium payments. For example, a premium payment for a policy owned by a charitable organization is deductible by the payor if the charity owns the policy outright. The premium is deductible because it is treated as a charitable contribution, not because it is a life insurance premium. Similarly, in cases where a corporation pays the premium on a policy covering an employee and the death benefit is payable to the employee�s beneficiary, the premium may be deductible as compensation paid to the employee. Note, however, that the Internal Revenue Code specifically disallows deductions for premium payments whenever the taxpayer is directly or indirectly a beneficiary under the policy, regardless of any other rule that might otherwise permit a deduction.

Other situations in which premium payments may fit the definition of a particular deductible expense include premium payments made on behalf of an ex-spouse (alimony).

In summary, there are two important concepts to remember when determining the deductibility of a life insurance premium payment. The first is the general rule that premium payments are nondeductible. The second is that a deduction can sometimes be obtained for a premium if the premium can be properly characterized as some other specific type of deductible expense under the Internal Revenue Code. This determination will usually require a substantial knowledge of tax law, and the advice of a competent tax professional should be sought.