If the insurance premiums were not tax deductible, what other taxation will this affect?

When insurance premiums are not tax deductible, it primarily impacts the taxation of benefits received from the policy. If premiums are paid with after-tax dollars, then any benefits received from the policy—such as death benefits or cash values—are typically received tax-free by the beneficiaries. Thus, when premiums aren’t deductible, the tax-free status of the benefits remains unchanged, since the premiums were already taxed.

To elaborate further, if premiums were deductible, it might complicate the taxation of benefits, as this could mean that when benefits are paid out, they could be subject to tax based on the amounts previously deducted. However, because premiums are not deductible, beneficiaries can receive the full benefit without tax implications, fulfilling the purpose of providing financial support without a tax burden.

This approach also relates directly to policy cash values and how they are taxed. While cash values accumulate on a tax-deferred basis, the key takeaway here is that the immediate effect of non-deductible premiums on taxation centers around the benefits realized from the policy itself.