Group Term Life Income
Under Internal Revenue Code Section 79, employer paid life insurance amounts in excess of $50,000 are considered taxable income to you. You are taxed based on the value of the benefit (not the benefit itself). The value is determined by the an IRS table published in the tax regulations. This “imputed income” is then included as income on your paycheck and W-2 so that taxes can be withheld.
To calculate the imputed income amount added to your paycheck, determine the amount of company paid life insurance you have exceeding $50,000. Then using the table below locate your age on December 31st of this year. Multiply the excess life amount by the table for your December 31 age to find the monthly imputed income to you. Multiply the monthly income by 12 and divide by 26 to find the amount added to your paycheck each month.
For example:
Base Salary = $51,000 per year
Life insurance is $77,000 ($51,000 x 1 1/2 = $76,500...rounded up to next $1,000)
Age = 40 on December 31
Imputed Income = $77,000 – $50,000 = $27,000
$27,000/1000 x $0.10 = $2.70 per month
$2.70 x 12 / 26 = $1.25 per paycheck
IRS table for cost per $1000 of Company Paid Life Insurance Coverage
| Age Monthly Income |
| Under 25........................................................$0.05 |
| 25–29.............................................................$0.06 |
| 30–34.............................................................$0.08 |
| 35–39.............................................................$0.09 |
| 40–44.............................................................$0.10 |
| 45–49.............................................................$0.15 |
| 50–54.............................................................$0.23 |
| 55–59.............................................................$0.43 |
| 60–64.............................................................$0.66 |
| 65–69.............................................................$1.27 |
| 70 and over.....................................................$2.06 |
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