Which statement about premiums paid by the employer and employee is true?

Which statement about premiums paid by the employer and employee is true?

• A. Group Term Life premiums paid by an employer are tax deductible to the business.
• B. Employee paid premiums are tax deductible.
• C. Employer paid premiums always create taxable income to the employee.
• D. All employer paid premiums for amounts above $50,000 are tax exempt.

Answer: (A)

Group term life insurance provided by an employer is treated as a business expense for the employer, so the employer can deduct the premiums. The employee, however, can receive the benefit tax-free up to the first $50,000 of coverage. Any coverage above $50,000 is considered imputed income to the employee and is taxed as ordinary income. So the employer’s premium deduction is the true statement, while personal deductions for employee premiums aren’t generally available, not all excess premiums are tax-exempt, and not everything paid by the employer is always taxable.

Group term life insurance provided by an employer is treated as a business expense for the employer, so the employer can deduct the premiums. The employee, however, can receive the benefit tax-free up to the first $50,000 of coverage. Any coverage above $50,000 is considered imputed income to the employee and is taxed as ordinary income. So the employer’s premium deduction is the true statement, while personal deductions for employee premiums aren’t generally available, not all excess premiums are tax-exempt, and not everything paid by the employer is always taxable.