The Life Insurance “Gotcha Tax” – IRS Assesses Excise Tax on Normal Life Insurance Policies

Thank you very much for this “public service” announcement. Could you confirm that a person:

1. Born in the United States
2. Who has not lived in the United States since he was a child
3. Is a citizen of the country where he resides
4. Buys a life insurance policy in his country of residence and country of primary citizenship

is required to pay the IRS for NOT being a “Good Homelander” and buying a “foreign life insurance policy?”

Tax-Expatriation

The information featured on this blog is designed to orient U.S. citizens (“USCs”) and U.S. lawful permanent residents, i.e., “green card” holders (“LPRs”) to important U.S. federal tax consequences to them.  It’s primary focus relates to those USCs or LPRs who are contemplating renouncing their citizenship or abandoning their permanent residency status.

There are many complex federal tax rules that are often overlooked in the international area.  One of those is the excise tax that is payable by the USC or LPR individual, not the non-U.S. insurance company, when premiums are paid to an insurance company.   The IRS taxes the position that the ” . . .  the Service will generally seek payment of the excise tax from the U.S. person making the premium payment . . .” See, IRS Foreign Insurance Excise Tax- Audit Technique Guide.

This is a 1% excise tax on the premiums paid for each…

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