An employer pays the premiums on group term life insurance for its employees. Under IRC §79, the cost of how much coverage may be excluded from the employee's taxable income?

Why A is correct

IRC §79 lets an employer provide group term life insurance, and the employee is not taxed on the premiums for the first $50,000 of coverage. For coverage above $50,000, the employee is taxed on the cost of the excess protection, based on IRS table rates. The $50,000 threshold is the key number. The $5,000 figure belongs to a different rule (the employee death benefit exclusion), the entire amount is not tax-free, and there is no $10,000 limit. This tax break makes group term life an attractive employer-provided benefit.

Why the other options are wrong

• B) $5,000 is the employee death benefit exclusion under IRC §101(b), a different rule. The group term coverage limit under IRC §79 is $50,000.
• C) Only the first $50,000 of group term coverage is excludable. The employee is taxed on the cost of coverage above that threshold.
• D) There is no $10,000 ceiling under IRC §79. The correct excludable amount is the first $50,000 of group term life coverage.

Memory hook

Fifty grand of group term is the IRS's treat; beyond that, the cost lands on the employee's tax bill.