Group Term Life Insurance Taxation

Group Term Life Insurance Taxation: The Truth About Taxation

Taxation of Group Term Life Insurance

If you are going to have a group term life insurance policy, whether you are an employer or an employee, it is very important for you to understand group term life insurance taxation. It can be a very complex matter. So what happens for taxation of a group term life insurance policy for a business owner? And what about an employee?

Taxation For the Business Owner

Usually, group term life insurance policies are tax deductible to a business owner both as an ordinary and necessary business expense. It is not tax deductible in most states if the business owner, employer or business partner is a beneficiary of an immediate family member or relative’s group term life insurance policy. However, even if this is the case, death benefits still remain tax free for the employer, business owner or business partner. Of course, each and every state has different laws when it comes to taxation. You should make sure that you find out within your state what the laws are when it comes to group term life insurance taxation in your area. It is something that is very important to know if you are a business owner with a group term life insurance policy for your company.

Taxation for the Employee

Group term life insurance policy premiums that are paid by the employer for group term life insurance on the employee are not taxable as income under certain circumstances. These circumstances include if it is a qualified group term life insurance plan, or if the death benefit is under fifty thousand dollars or less. Generally, group term life insurance is tax free to the beneficiary. In some states, if the amount of money that the beneficiary receives is over one hundred and thirty thousand dollars, it may be able to be taxed. Just like with business owner and employer’s taxation of group term life insurance policies, this can vary according to state. Every state has its own laws and regulations. It would be a good idea for you to find out what these laws and regulations are, because it is something that is very important to know.

Consult a Legal Advisor

If you might have any questions that have to do with taxation of group term life insurance, you should make sure that you get them cleared up as soon as possible. One of the best ways is seeking a legal advisor or attorney in your area. These people will also be able to tell you about any of the regulations or laws in regards to group term life insurance policies in your location. Always remember that there is no dumb question but a question that is never asked.