Where to Put Group Term Life Insurance on 1040
What Does Group Term Life Insurance Have to Do with Taxes?
Group life insurance is a benefit many employers provide to their workers. The employer pays the premium and owns the policy, but you – the employee – are the one whose life is insured. The benefit to you? You can name your beneficiary(ies), so that if anything happened to you, your loved ones would get that insurance payout.
But there are limits to what most employers are willing or able to provide. Because of the tax implications of going over that $50,000 benchmark, many employers have employees pay for any additional coverage over that threshold. If the employee pays, that removes the coverage from taxable status. The IRS also enforces rules about the amount of coverage an employee can receive as a job benefit before a portion of the cost is considered part of their salary.
As of 2023, if your employer provides more than $50,000 of group term life coverage during a given tax year, a portion of the cost is counted as part of your salary on your yearly W-2 form. Like the rest of your salary, this amount is subject to tax: income tax, Social Security tax, and Medicare tax (FICA).
Don’t have enough term life insurance through work? We can help! Give us a call at (800) 521-7873 or click the button below for a free quote.
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