Owner/Agent, Pelfrey Financial Services, Lexington, KY
Your company can pay for your life insurance, but if they provide more than $50.000 of coverage, you will be taxed on the cost of the premium for the portion above $50,000.
Example:
Your company pays $1,500 a year to provide you with $100,000 of life insurance. Since they are paying for $50,000 more coverage than allowed, you will have to pay taxes on 1/2 half of the premium, or $750. If you are in the 25% tax bracket, you would be paying $187.50 in taxes.
Enrolled Agent-licensed to practice before the IRS, Samuel N Smith, EA, South Carolina
It is important to remember that the "insurance you are buying at your employer is "term insurance". If you are a" family man" how far will $50,000 go if yuo are deceased. The point is every time you buy a life insurance policy you are paying the "administrative costs" associated with that policy. Instead of having multiple companies that your wife will have to provide proof of death claims forms is it going to easier on her and cheaper on yuo to have a "life insurance needs analysis" and provide that level of coverage with a policy that is designed to stay with you through the life of the children and to meet yuor burial expense needs?
The answer here is yes, they can pay for your life insurance. The thing to keep in mind is that Uncle Sam is watching. This is a question of taxation, not payment. Then, it really depends on how that arrangement is set up. Someone is going to pay the tax on your compensation, whether it's premiums or benefits. There are different ways this happens depending on whether you're an owner or not and what the purpose of the insurance is. If this is insurance that's included with your benefits and it's offered to everyone the same way, it's treated differently than if it's an executive benefit only offered to high level employees or owners. There are certain amounts that employers are can offer their employees with no tax consequences to you. It depends on your individual classification.
If this is an executive benefit and the premiums are not taxed, there's a possibility the death benefit could be taxable.
As much as I'd like to give an all encompassing answer, I can't. This is more a specific question for the company or your CPA. Ask the question. It's much better to find out before something unintended happens.
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Example:
Your company pays $1,500 a year to provide you with $100,000 of life insurance. Since they are paying for $50,000 more coverage than allowed, you will have to pay taxes on 1/2 half of the premium, or $750. If you are in the 25% tax bracket, you would be paying $187.50 in taxes.
If this is an executive benefit and the premiums are not taxed, there's a possibility the death benefit could be taxable.
As much as I'd like to give an all encompassing answer, I can't. This is more a specific question for the company or your CPA. Ask the question. It's much better to find out before something unintended happens.