Imputed income calculator for group life over $50,000

How to use it

1. Enter the total group-term life coverage your employer provides.
2. Enter your age on December 31 of the tax year.
3. Enter the number of months you were covered, up to 12.
4. Enter anything you paid toward the coverage with after-tax money. Leave it at zero if you paid nothing or paid with pre-tax deductions.

The large figure is the taxable imputed income for the year. The table beneath shows each step.

How the math works

The first $50,000 of employer-paid group-term coverage is not taxed. For the rest, the IRS counts a value as imputed income. It does not use your employer's real cost. It sets the value from Table I:

1. Coverage above $50,000 = total coverage − $50,000, never below zero.
2. Find your Table I rate by age bracket. The tool uses the cost per $1,000 per month: $0.05 for under 25, $0.06 for 25 to 29, $0.08 for 30 to 34, $0.09 for 35 to 39, $0.10 for 40 to 44, $0.15 for 45 to 49, $0.23 for 50 to 54, $0.43 for 55 to 59, $0.66 for 60 to 64, $1.27 for 65 to 69 and $2.06 for 70 and older.
3. Cost = (excess ÷ $1,000) × rate × months covered.
4. Imputed income = cost − what you paid after tax, never below zero.

The tool also shows 7.65% of that amount for Social Security and Medicare tax, which it says your employer withholds.

Hypothetical example: $150,000 of coverage, age 47, 12 months and nothing paid by you. The excess is $100,000, the rate is $0.15, so the cost is 100 × $0.15 × 12 = $180. The 7.65% tax on that is about $13.77. Income tax on the $180 depends on your bracket.

What it assumes

• The rates are those in the tool, taken from IRS Publication 15-B, Table I. Check the current publication, since the IRS can change the table.
• One coverage amount applies for all the months entered, and one age bracket applies for the year. The bracket is based on your age on December 31.
• The tool says the amount appears in box 12 of your W-2 with code C.
• The 7.65% is a flat figure, the sum of the Social Security and Medicare employee rates. It ignores the Social Security wage base and any additional Medicare tax, which can change the real withholding.

Where it stops being right

• If your coverage amount changed during the year, run the tool separately for each period and add the results.
• It does not compute income tax. The tool says the amount is added to your wages for income tax, so the tax depends on your bracket and state.
• Special rules apply to retirees and to coverage on a spouse or child. Those cases are outside the tool.
• Your employer calculates the official figure. Use this tool to check it, and ask payroll if the W-2 amount does not match.

See group life over $50,000 and imputed income for the rule in full, and is life insurance taxable? for how other life insurance money is taxed. The is my life insurance through work enough? shows whether the coverage is enough in the first place.