Regarding the taxation of group life insurance premiums in Canada, what is the generally accepted rule for the portion of the premium for coverage over $25,000 paid by an employer for an employee?

Question: Regarding the taxation of group life insurance premiums in Canada, what is the generally accepted rule for the portion of the premium for coverage over $25,000 paid by an employer for an employee?

Answer options:

• It is considered a non-taxable benefit to the employee. ✅ It is treated as a taxable benefit to the employee and must be included in their income.
• It is tax-deductible for the employee, but not for the employer.
• It is subject to GST/HST at the employee level.

Correct answer: It is treated as a taxable benefit to the employee and must be included in their income.

Explanation: According to the Income Tax Act (Canada), the employer-paid premiums for group term life insurance coverage exceeding $25,000 are considered a taxable benefit to the employee. This amount must be included in the employee's income for tax purposes, as it is viewed as an additional form of compensation.