Are state and federal income tax refunds of the deceased, proceeds from deceased life insurance policy, and a security deposit refund from deceased lease taxable income for the estate?

Here's a summary of what's taxable and nontaxable for the estate of a deceased person from tax refunds,  life insurance, and security deposits.

Taxable Income for the Estate

1. Federal Income Tax Refunds: These refunds are considered assets of the deceased's estate and aren't taxable income.
2. State Tax Income Refund: If the deceased received a tax benefit from itemizing deductions in 2023, the state tax refund received in 2024 is considered taxable income for the estate, if they did not itemize it is not generally taxable. Report the income on the Final Return using TurboTax and it will guide your through the tax implications. If you determine you need to file an Estate Return click here.
3. Life Insurance Proceeds: While the life insurance proceeds themselves are not taxable, any interest earned on these proceeds is considered taxable income. You can use this IRS tool to double-check your taxability.
4. Security Deposit Refunds: A refundable security deposit that is returned to the tenant at the end of the lease is not considered taxable income

For additional information, refer to the following article:

• Filing a final federal tax return for someone

Original Post