Maybe it’s because we’re approaching the end of the year and many are prepping for reporting season. Whatever the reason, this question about the taxability of Group Term Life Premiums has been asked a few times lately.
So we thought it might be worth posting some info for you.
Here’s the short answer: Amounts up to $50,000 in coverage are not taxable. Incremental amounts of coverage above $50,000 in group term life products are taxable based on something called an IRS Premium Table (for more info click on the links below).
In other words, employers can make group-term life insurance coverage available to employees that is in excess of $50,000, but the excess cost of coverage above $50k is taxable to the employee even if employees are paying for the insurance premiums associated with the coverage.
For more detailed information, here’s a link to the IRS page that discusses Group Life Insurance.
The attached Compliance Overview may also be helpful.