An employee receives ,000 of non-discriminatory group term life insurance coverage from their employer. The cost of the policy is .50 per ,000 of coverage per month. How much must be included in the employee's gross income for the year?

Answer options:

How to approach this question

Formula: (Total Coverage - 50,000) / 1,000 * IRS Cost per Month * 12 months.

Full Answer

B.0✓ Correct

The first ,000 of group term life insurance is tax-free. The cost of coverage in excess of ,000 is taxable. Excess = ,000. ,000 / ,000 = 40 units. 40 * .50 * 12 = 0.

Common mistakes

Forgetting to subtract the ,000 exclusion or forgetting to multiply by 12 months.

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