Can I give my employees a monthly credit for getting life insurance?

Can I give my employees a monthly credit for getting life insurance?

by Robert D. Hornick, CPA | Jun 13, 2019

Can I give my employees a $50 monthly credit for getting life insurance? And can I write it off as business expense or employee compensation?

Payment to an employee for the purchase of life insurance, or giving an employee a life insurance policy, is basically providing an “employee benefit.” Generally, unless an employee benefit is provided by the use of an approved IRS employee benefit plan, that employee benefit would be taxable as compensation to the employee. Yes, it could be written off as a wage expense, but consider that both the employee and the employer will bear wage tax costs on those insurance payments.

There is a provision in the Internal Revenue Code for an employer to provide for the cost of group term life insurance coverage on employees up to $50,000 each that can be excluded from taxable wages. That insurance coverage may be deducted by the employer as an employee benefit plan. The group term life insurance policy must be for at least 10 full-time employees at some time during the year. An exception to the 10-employee rule applies if all full-time employees are covered with certain coverage requirements.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Robert D. Hornick, CPA, is with Hornick & Associates LLC in Philadelphia.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.