California Insurance License Exam Practice Test Practice Question
How much employer-provided group term life insurance is exempt from income taxation?
Correct Answer: B
Rationale: Employer-provided group term life insurance is tax-exempt up to a certain limit. The IRS allows up to $50,000 of coverage to be tax-free for employees. Therefore, option B is accurate as it aligns with this threshold.
Option A, $25,000, is incorrect as it is below the exempt limit. Options C and D, $75,000 and $100,000 respectively, exceed the tax-exempt amount, meaning any coverage above $50,000 would be subject to income tax. Understanding these limits is crucial for both employers and employees to effectively manage tax liabilities related to life insurance benefits.
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