Did you know that your life insurance premiums may be a deductible business expense? The April 15th tax deadline may have already passed but here's a great tax tip for your next filing cycle. If you filed for an extension, you may still have time to put this smart tip to good use. Learn how you can benefit from paying your life insurance and how to properly set up your policies for tax advantages.
Life insurance premiums are deductible as a business-related expense, and the death benefit is generally tax-free for individual policy owners. Although death benefits for business-related beneficiaries are often tax-free as well, there are certain situations in which the death benefit for corporate-owned life insurance can be taxable. However, employers offering group-term life coverage to employees can deduct the first $50,000 of premiums that they pay, and amounts up to this limit are not counted as income to the employees. Life insurance premiums can also often be deducted for most types of non-qualified plans, such as deferred compensation or executive bonuses. Usually, the premiums are considered compensation for key executives under the rules of these plans. However, in some cases the deduction cannot be taken until the employee constructively receives the benefit.