Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under IRC Section 79, group term life insurance provided by an employer is taxable to the employee:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
IRC Section 79 provides that the first $50,000 of employer-paid group term life insurance is tax-free to the employee. The cost of coverage over $50,000 is included in the employee's gross income as imputed income, calculated from an IRS table based on age and the amount of excess coverage. The death proceeds themselves remain generally income-tax-free under Section 101. The rule applies only to group term coverage, not to group permanent insurance, and if the employee contributes toward the premium, that contribution reduces the taxable amount.
Why the other options are wrong
- A) The entire coverage is not taxed; the first $50,000 of employer-paid group term coverage is specifically excluded from income.
- C) Tax on the coverage is measured annually on the economic benefit; the death claim itself is separately tax-free under IRC Section 101.
- D) If the employee pays the entire premium, there is no imputed income; but the general rule still excludes the first $50,000 of employer-provided coverage.
Memory hook
First 50k of group term rides free; above that, the IRS takes its cut.