Life · Chapter 6 · Taxation
Taxation of Policy Dividends
Definition
Dividends are tax-exempt (a return of excess premium). Dividends above total premiums paid are taxable. Interest earned on accumulated dividends is taxable each year. In a MEC, dividends are taxable unless used to buy paid-up additions.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms