Under IRC Section 79, employer-paid group term life insurance coverage up to what amount is generally excluded from the employee's gross income?

Why B is correct

IRC Section 79 allows an employer to provide the first $50,000 of group term life insurance coverage without its cost being included in the employee's gross income. The cost of coverage above $50,000 is taxable to the employee using IRS table rates, and the taxability applies even though the employee does not actually receive the premium in cash. This exclusion applies to employer-paid group term plans that satisfy the statute's eligibility and nondiscrimination requirements, and it is a major tax advantage of group life insurance.

Why the other options are wrong

• A) $25,000 is not the Section 79 exclusion amount; the first $50,000 of employer-paid group term coverage is excluded from income.
• C) $75,000 exceeds the statutory exclusion; only the first $50,000 of coverage is tax-free and the excess is taxable.
• D) $100,000 is not the exclusion ceiling; the cost of coverage above $50,000 is taxable to the employee.

Memory hook

First 50 grand of group term = free lunch. Above it, the IRS takes a seat.

Why A is correct

Under IRC Section 79, the cost of the first $50,000 of employer-provided group term life insurance is excluded from the employee's gross income. The imputed cost of coverage in excess of $50,000 must be included in the employee's taxable income, using a table of rates issued by the IRS. The death benefit of the group policy remains income tax free under IRC Section 101(a). This $50,000 threshold is a frequently tested tax fact. The rules apply to group term life insurance paid for by the employer; if the employee pays for the excess coverage, the employee's own contributions reduce the taxable amount.

Why the other options are wrong

• Only the first $50,000 of coverage is excluded; the cost of the coverage above $50,000 produces taxable income for the employee.
• Only the imputed cost of the coverage above $50,000 is taxed, not the entire premium paid by the employer.
• The group term death benefit remains income tax free to the beneficiary under IRC Section 101(a), regardless of the $50,000 threshold for premium cost.

Memory hook

$50,000 is the tax-free line for employer-paid group term. Above it, imputed income begins.