Employer Tax Implications With Group Life Insurance

Premiums paid by the employer for group term life insurance are income tax deductible as ordinary and necessary business expenses (unless the employer is directly or indirectly the beneficiary of the coverage). No deduction is allowed for premiums paid for the coverage on partners or sole proprietors because the premiums would be considered in payment of personal coverage. However, premiums paid to cover the partners’ or sole proprietors’ common law employees are typically deductible. Shareholder-employees of S corporations who own more than 2 percent of the stock of the business are treated in the same way as a partner.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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