Taxes on employer supplied life insurance?

[ticktock]

I read somewhere that if you get life insurance through your employer anything over a $50,000 pay out is taxed. Is this true? Why would this be taxed this way when regular life insurance isn't?

 

[lvanleer]

Although anything over $50,000 coverage(not paid out) is taxed I don't believe you actually pay the tax but the employer pays it according to IRS regulations....In addition I believe it's only figured for FICA and Medicare. My theory on this is that you generally aren't paying the premiums but the employer is and it's looked at as other income to you whereas any life insurance that you purchase on your own is purchased with after tax income.

 

[Christine]

Although anything over $50,000 coverage(not paid out) is taxed I don't believe you actually pay the tax but the employer pays it according to IRS regulations....In addition I believe it's only figured for FICA and Medicare. My theory on this is that you generally aren't paying the premiums but the employer is and it's looked at as other income to you whereas any life insurance that you purchase on your own is purchased with after tax income.

There is a tax and it's called "Excess Life Insurance" or something like that. My company always deducted it from the people that it pertained to on one of the last pay periods of the year. It was listed as "ELI" on my paystub and was usually somewhere around $40 or something like that.

 

[ticktock]

So if my DH you know ( I don't even want to type it, silly I know ) and his employer provided insurance was say $150,000 what would I owe in taxes? Is it like income tax based on how much you make?

 

[Janet Hill]

So if my DH you know ( I don't even want to type it, silly I know ) and his employer provided insurance was say $150,000 what would I owe in taxes? Is it like income tax based on how much you make?

You would owe taxes on the premium that was paid for the $100,000 (excess of (50,000)of life insurance. And that amount of course depends on age, gender etc. Let's say the employer paid $200 annual premium, then you owe taxes at your marginal rate on the $200. It's really not much money at all for most people.

 

[ameraumi]

So want to know that if the policy is paid are you taxed? The answer is no. As a beneficiary you are not taxed for the money you receive from a Life Insurance payout. I have asked this since I just received the payment on my DH's policy. The only taxable part of it is if they put the funds in an interest bearing checking account for you to draw funds from.

 

[LindaG4458]

Every year we get a net zero check stub from DH's employer grossing up the premium that is taxable. It then rolls into his regular income for tax purposes.

 

[Binnie]

If you're really concerned, look up imputed income on www.irs.gov. It explains how to calculate it and how it works.

Imputed income is the reason that my employer-paid life insurance caps out at $50K. I hate claculating imputed income!

 

[manning]

You pay taxes on premiums covered over 50,000. my wife is retired and has this situation. The pain in the butt is that there is not a specific line on the tax form. The first time we filed I missed it and had to do an x1040 for a lousy $2.00. Without looking up the forms you add the amount to the owed taxes and put a letter next to the box so they know why the amount is more. When my wife hits 65 the coverage is reduced to under 50,000 and we don't have to worry about it. I think what you are paying is the social security tax.

If you use turbo tax it will guide you thru it. Also you will get a w-2 at the end of the year. Read the instructions on it, it will explain.

 

[manning]

So want to know that if the policy is paid are you taxed? The answer is no. As a beneficiary you are not taxed for the money you receive from a Life Insurance payout. I have asked this since I just received the payment on my DH's policy. The only taxable part of it is if they put the funds in an interest bearing checking account for you to draw funds from.

We are talking about taxes on premiums over 50,000, not pay out.

 

[Mickeyluver37]

I read somewhere that if you get life insurance through your employer anything over a $50,000 pay out is taxed. Is this true? Why would this be taxed this way when regular life insurance isn't?

You have to pay taxes on the premiums for life insurance over $50,000, because the IRS considers it compensation. Your company is paying the premiums for you, and the IRS lets you have the first 50K as a freebie. The rest will show up on your paystub and eventually on your W2. It's really not a big deal- these group policies are so cheap, that it can literally only be pennies per pay check.

 

[aprilgail2]

The company I work for gives us a set amount of life insurance-double pay out if you are killed on the job. Each year on our check they take money out for life insurance tax but then the company reimburses us on on another line in the paycheck for the tax paid out so they cover all the taxes too.

 

[aprilgail2]

I think what you are paying is the social security tax.
.

That would be weird if it was a social security tax since where I work we do not pay into social security but we are taxed on life insurance. I think my entire life I have only paid in 250.00 to social security and that was when I was around 18.

 

[manning]

That would be weird if it was a social security tax since where I work we do not pay into social security but we are taxed on life insurance. I think my entire life I have only paid in 250.00 to social security and that was when I was around 18.

How do you do that???

 

[mfd25wife]

How do you do that???

It could be fire or police. They pay into a different system than SS.

 

[GeorgeG]

Benefits supplied by employers can be considered part of your earned income. There are limits that can change from time to time. One of the most frequent changing allowance is mileage. Any re-imbursement over the allowance can (and will) be taxed. There is also a tax on the use of a company vehicle that you take home. That is why some companies charge a fee for company vehicles that are used to commute, unless the person is on call. The fee is calculated according to the distance you live from your normal reporting headquarters.

There is often a lot of confusion regarding what we think is "free" these days.

 

[aprilgail2]

How do you do that???

Railroad- rasilroad workers pay into railroad retirement not social security- we don't pay it nor do we collect it. We pay a bit more into railroad retirement than people pay into social security but its a much better system. A lot of the congressmen and senators also pay into it rather than social security.

 

[Dan Murphy]

The imputed income on life insurance over $50k, and the resultant tax needed to be paid on that amount, is not the actual premium paid by the employer, but rather derived from an IRS table, which would be only by chance, the same number as the actual premium. I have never seen the tax table and the actual premium similar.

(Not to be taken as financial nor insurance nor tax advice)

 

[manning]

I found this. It may help explain

http://www.irs.gov/govt/fslg/article/0,,id=110345,00.html