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Where to Put Group Term Life Insurance on 1040
Wondering where to put group term life insurance on 1040 tax forms? We’ll show you where that amount is on your W-2, why it’s – surprise! – probably already on your 1040 form, plus explain how taxation of group term life insurance works.
Jump to a section:
What Does Group Term Life Insurance Have to Do with Taxes?
How to Find Your Group Term Life Insurance Amount on a W-2 Form
How Did Your Employer Calculate This Number?
Where to Put Group Term Life Insurance on 1040 Forms
Is Your Group Term Life Insurance Enough?
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.
How to Find Your Group Term Life Insurance Amount on a W-2 Form
You will only find this on your W-2 if your employer provided an amount over $50,000 as a benefit.
If that’s the case, according to the IRS, you’ll find this amount in two places:
- Reported as part of your wages in Box 1. Since this is the total amount of your wages, you won’t know how much of this is attributed to your group term life policy. That’s why this second box is important.
- Shown separately in Box 12 with Code C. This is the total amount of your wages that come from your employer-sponsored group term life policy.
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.
How Did Your Employer Calculate This Number?
NOTE: You do not have to calculate this amount – it is your employer’s responsibility to include this information in box 12 of your W2 (with code C). We’re just showing you how they got that number.
In most cases, this number is going to be quite small – often under $250. Keep in mind that you aren’t being taxed on the face value of your group term life policy. The IRS requires employers to use a certain chart, with figures that estimate the cost of that coverage per $1,000 per month. It’s a sliding scale, based on age.
The IRS includes this chart in Publication 15-B, on page 13. Here are the specific multipliers they use:
| Age | Cost for $1,000 of Protection for 1 Month |
| 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+ | $2.06 |
Per the IRS instructions, your employer took the following steps to calculate the wage ascribed to this policy:
- A. Calculate the monthly cost of the employee’s coverage. Multiply the number of thousands of dollars of coverage over $50,000 (rounded to the nearest $100) by the appropriate cost shown in the table above. They used your age on the last day of your tax year in this calculation.
- B. Calculate the total amount that counts as the employee’s wages. Multiply the monthly cost (A) calculated in the step above by the number of months of coverage at that cost.
Sample Calculation
Let’s say your employer provides you with $100,000 of group term life coverage, you pay $0 a month for this coverage, and you ended the tax year at age 50.
$100,000 of coverage - $50,000 (exclusion amount) = $50,000 (amount of coverage subject to tax)
50 (number of thousands of dollars of applicable coverage) x $0.23 (cost from the IRS table above based on age 50) = $11.50
$11.50 (monthly cost for coverage) x 12 (number of months of coverage that tax year) = $138
$138: amount added to the employee’s salary as taxable income
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.
Where to Put Group Term Life Insurance on 1040 Forms
The good news: since this number is already included in your wages in Box 1 on your W2, there is no separate entry needed on your 1040 form. Once you enter your wages on line 7 of your 1040 or 1040A, or line 1 of your 1040EZ, you’ve accounted for it!
Think of Box 12 (code C) on your W2 form as an FYI. It’s telling you how much of your total wages are derived from your group term life coverage over $50,000. But you don’t have to take any extra steps to indicate this amount on your 1040 – it’s already been added to your wage total by your employer.
There...wasn’t that easier than you thought it would be?
Is Your Group Term Life Insurance Enough?
We’d be remiss if we didn’t tell you: employer-sponsored life insurance often isn’t enough to meet your loved ones’ needs, if anything were to happen to you.
Try our free life insurance needs calculator to find out how much coverage you actually need. It asks a few questions about your life and your finances, with easy sliders you can use to adjust your answers and instantly see how much coverage we think you’ll need:
If your group policy can’t meet those needs, we can help! Call us at (800) 521-7873 to talk to a real person about your coverage needs, or click the button below to get a free quote now.
