What is the limit for Group Term Life Insurance that is not taxable?

The limit for Group Term Life Insurance that is not taxable is correctly identified as $50,000. This figure is crucial because it defines the threshold above which any coverage provided by an employer becomes a taxable fringe benefit to the employee.

When an employer provides group term life insurance coverage up to $50,000, the premiums paid by the employer are not considered taxable income to the employee. However, if the coverage exceeds $50,000, the cost of the insurance over that amount is subject to taxation based on the IRS guidelines, specifically addressing the economic benefit of excess coverage.

This tax treatment is designed to encourage employers to offer life insurance policies that can provide financial support to employees' beneficiaries without imposing a tax burden for moderate amounts of coverage. In contrast, amounts below $50,000 do not attract any direct tax implications for the employee. Understanding this limit is essential for payroll professionals managing employee benefits and tax compliance.