Question & Answer: Two years ago, Marvin Milhouse, age 35, received a salary of $70,000 from his employer, Industrial Corp. In addition, Indu…..

Two years ago, Marvin Milhouse, age 35, received a salary of $70,000 from his employer, Industrial Corp. In addition, Industrial Corp. paid the following insurance premiums for Marvin as part of plans for insurance coverage adopted by it covering substantially all its employees:

$400   Premiums for $60,000 of group term life insurance

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$5,500    Premiums for Blue Cross-Blue Shield medical insurance coverage for Marvin and his family

$1,200    Premiums for a policy of disability insurance assuring Marvin of certain monthly payments in the event of disability caused by accident or illness

Should Marvin have included any of the insurance premiums in his gross income?

In the middle of last year, Marvin sustained a serious back injury while skiing in Chile. Blue Cross-Blue Shield paid his medical expenses of $9,400. Because he was disabled from working throughout the remainder of last year, the disability insurance carrier paid Marvin $1,000 per week during the last 20 weeks of last year. The payments did not begin until the sixth week of Marvin’s disability. Marvin’s regular pay is about $1,350 per week. Should Marvin have included any of these amounts in gross income for last year?

Marvin died early this year, and his wife received the $60,000 in group term life insurance proceeds. Must she include that amount in her gross income for this year?

Expert Answer

 

Pursuant to Internal Revenue Code (Code) Section 79, an employee may exclude up to $50,000 of employer-provided group-term life insurance from his or her income. This tax exclusion applies only to insurance on the life of the employee.

*Excess premium will be included in gross income

*rest premiums are company paid premium which are not considered in gross annual income of the employer

*Disability insurance carrier if paid by the employer are taxable, included in gross income.

*Medical expenes paid by the insurance company will not be included in the gross income

*Nope do not have to include the $60000 in the gross income as the money you get has been exempted from taxes

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