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About Andrew J. MannThe cost of group term life insurance may be taxable income to an employee
Treasurer |
Here is how to determine whether or not the cost of group term life insurance is taxable to an employee:
Complete instructions and an Excel template for computing these costs are available by contacting: Andrew Mann, [email protected] or 508-370-7777.
- Generally the cost of up to $50,000 of group term life insurance coverage is tax exempt.
- The cost of coverage in excess of $50,000 is taxable to the employee.
- The excess cost is calculated on a monthly basis.
- First determine the amount of group term coverage for the employee each month.
- Then subtract $50,000 from each month’s coverage.
- Apply the appropriate rate from the “Table I” to the balance.
- The result is a taxable fringe benefit that must be included in gross income on the employee’s W-2 at year-end.
- For example: an employee aged 33 had $80,000 of group term coverage in place for the entire year. For the taxable amount multiply .08 (cost per $1,000 for one month) times 30 ($80,000-$50,000) times 12 (number of months in place), or $28.80.
Complete instructions and an Excel template for computing these costs are available by contacting: Andrew Mann, [email protected] or 508-370-7777.