Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
An employer pays the entire premium on $80,000 of group term life insurance for an employee. For federal income tax purposes, the employee must include in gross income:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under IRC Section 79, the first $50,000 of employer-provided group term life insurance is excluded from the employee's income. The employee must include in gross income the cost of the coverage in excess of $50,000, calculated using the IRS uniform premium table, reduced by any amounts the employee paid. Here, the taxable amount is the cost attributable to the $30,000 of coverage above the $50,000 threshold.
Why the other options are wrong
- B) The full $80,000 is not taxable; the first $50,000 of coverage enjoys the statutory exclusion.
- C) The tax-free portion is the first $50,000, and the excess above that line is taxable, not the other way around.
- D) Employer-paid group term life is not entirely tax-free; only the coverage up to $50,000 qualifies for the exclusion.
Memory hook
Fifty grand of group term rides tax-free; the excess above $50,000 is table-priced into income.