What is the maximum amount of group life insurance coverage an employer can provide without incurring a tax for the employee?

The correct answer reflects the maximum amount of group life insurance coverage that an employer can provide to an employee without the coverage being considered taxable income. This threshold is set at $50,000. Under IRS guidelines, group term life insurance coverage up to this amount is generally excluded from taxation for the insured employee. Amounts above $50,000 would typically be deemed taxable, with the employee responsible for income taxes on the value of the excess coverage.

In the context of life insurance benefits, this limit is established to encourage employers to provide insurance benefits without adding a financial burden to employees in terms of taxable income, thus making group life insurance appealing both for employers and employees alike. Understanding this threshold is crucial for compliance with tax laws and for effective benefits planning within a company.