Benefits-Imputed Income

Imputed Income for Employer-Provided Life Insurance and Voluntary Life Insurance

The Internal Revenue Service (IRS) requires that the value of life insurance in excess of $50,000 be reported as taxable income. The value of the amount over $50,000 is called “imputed income” and will be added to your taxable earnings. Both employer-provided life insurance and voluntary life insurance amounts are taxable. The table and example below show how imputed income is calculated.

Taxable Income per $1,000 of Protection
Employee's Age Monthly Annual
Under 25 $0.05 $0.60
25 through 29 $0.06 $0.72
30 through 34 $0.08 $0.96
35 through 39 $0.09 $1.08
40 through 44 $0.10 $1.20
45 through 49 $0.15 $1.80
50 through 54 $0.23 $2.76
55 through 59 $0.43 $5.16
60 through 64 $0.66 $0.60
65 through 69 $1.27 $13.44
70 and older $2.06 $24.72
Example: John is 42 years old and earns $40,000 per year. He is eligible for $120,000 (3 times his annual salary) of employer-paid basic group term life insurance.
The amount of taxable insurance is $70,000 ($120,000 minus $50,000). For the employer-provided basic life insurance, the annual imputed income is $84.00 (70 X $1.20). The $84.00 amount will be included on John’s W-2 (Box 12) statement as taxable income for the year.
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