Group-Term Life Insurance Tax Benefits

Group-Term Life Insurance Tax Benefits

Group-term life insurance tax benefits refer to the tax implications associated with employer-provided group-term life insurance plans, which are policies covering multiple employees under a single contract.

Under IRS regulations, employer contributions toward premiums for group-term life insurance coverage up to $50,000 are generally not considered taxable income to the employee. The value of coverage exceeding $50,000, however, is subject to income tax based on an IRS table that calculates the cost of the excess coverage.

For example, if an employee has a group-term life insurance policy with a coverage amount of $60,000, the first $50,000 would not be taxable, but the value of the additional $10,000 would be included in the employee’s taxable income based on the IRS guidelines.

Additionally, premiums paid by the employer for group-term life insurance are generally tax-deductible as a business expense, further enhancing the tax benefits associated with these policies for both employers and employees.