What is the limit for Group Term Life Insurance without tax implications?

What is the limit for Group Term Life Insurance without tax implications?

• A. $25,000
• B. $40,000
• C. $50,000
• D. $75,000

Answer: (C)

The limit for Group Term Life Insurance without tax implications is set at $50,000. This means if the employer provides an employee with group term life insurance coverage not exceeding this amount, the premiums paid by the employer for that coverage are generally not subject to taxation as income for the employee. When coverage exceeds $50,000, the IRS requires that the value of the excess coverage be reported as imputed income to the employee. This is calculated based on certain IRS tables, impacting the employee's taxable income and potentially increasing their tax liability. Understanding this limit is crucial for both employers and employees to ensure compliance with tax regulations and to maximize the benefits of employer-provided insurance without incurring extra tax burdens.

The limit for Group Term Life Insurance without tax implications is set at $50,000. This means if the employer provides an employee with group term life insurance coverage not exceeding this amount, the premiums paid by the employer for that coverage are generally not subject to taxation as income for the employee.

When coverage exceeds $50,000, the IRS requires that the value of the excess coverage be reported as imputed income to the employee. This is calculated based on certain IRS tables, impacting the employee's taxable income and potentially increasing their tax liability.

Understanding this limit is crucial for both employers and employees to ensure compliance with tax regulations and to maximize the benefits of employer-provided insurance without incurring extra tax burdens.