Section 79 plans provide life insurance benefits for employees paid for by the employer. The life premiums paid are 100% tax-deductible to the business. The “economic benefit” of the life insurance is reportable as taxable income for the insured employee. Only life insurance in excess of $50,000 is reportable.

What does IRC section 79 tell us about the taxability of group term life insurance?

IRC section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of such policies does not exceed $50,000.

How much tax do you pay on imputed income?

Imputed income is subject to Social Security and Medicare tax but typically not federal income tax. An employee can elect to withhold federal income tax from the imputed pay, or they can simply pay the amount due when filing their return.