How is group life insurance taxed in Nevada?

Group life insurance has specific federal tax treatment that Nevada employees should understand, though Nevada's no state income tax environment simplifies the state-level analysis.

Employer-paid premiums: The IRS allows employer-paid premiums for up to $50,000 of group life insurance coverage to be excluded from employees' taxable income. This is a valuable tax benefit — the employee receives coverage at no income tax cost.

Excess coverage: If employer-paid coverage exceeds $50,000, the cost of the excess coverage (calculated using the IRS Table I rates, which may differ from actual premiums) is included in the employee's W-2 as imputed income. This creates a taxable benefit for high-coverage-amount employees.

Death benefits: Group life insurance death benefits are received income-tax-free by beneficiaries under IRC Section 101(a), the same as individual policies. Nevada imposes no state income tax on these benefits.

Employee-paid premiums: When employees pay their own supplemental group life premiums through payroll deduction, those premiums are typically paid with after-tax dollars. However, the death benefit remains income-tax-free.

Nevada's no state income tax environment means group life insurance benefits are not subject to any state-level taxation — a meaningful advantage over states that impose income taxes on imputed income.