How to Calculate GTL Imputed Income: IRS Table I Rates and W-2 Impact

To calculate group-term life (GTL) imputed income, subtract $50,000 from your total employer-provided coverage, round the remainder to the nearest $100 and divide by $1,000 to get the number of taxable units, multiply by the IRS Table I monthly rate for your age on December 31, multiply by the number of months you were covered, and then subtract any premiums you paid with after-tax dollars. The result is the amount your employer adds to your taxable wages.

Under Internal Revenue Code Section 79, the first $50,000 of employer-provided group-term life insurance is excluded from your gross income. Only coverage above that amount produces imputed income, and the value is set by an IRS rate table rather than by what your employer actually pays the insurer.¹ If you have more than one employer-arranged group-term policy, add the face amounts together before applying the $50,000 threshold.²

The Five-Step Calculation

Step 1. Find the taxable excess. Subtract $50,000 from your total group-term coverage. On a $200,000 policy, the taxable excess is $150,000.¹

Step 2. Round and convert to $1,000 units. Round the excess to the nearest $100, then divide by $1,000. A $150,000 excess is 150 units. A $103,750 excess rounds to $103,800, which is 103.8 units.³

Step 3. Apply the Table I rate for your age. Your age on December 31 of the tax year controls the rate, even if your birthday is in January. Multiply units by the monthly rate. A 45-year-old with 150 units uses the $0.15 rate: 150 × $0.15 = $22.50 per month.

Step 4. Multiply by months of coverage. Full year: multiply by 12. Coverage that started in April: multiply by 9. In the running example, $22.50 × 12 = $270 in gross annual imputed income.

Step 5. Subtract after-tax contributions. If you paid $8 a month toward the premium with after-tax dollars, subtract $96 from the annual total: $270 − $96 = $174 in taxable imputed income.²

IRS Table I Rates for 2026

The IRS publishes these rates as “Uniform Premiums for $1,000 of Group-Term Life Insurance Protection” in Publication 15-B. Each figure is the monthly cost per $1,000 of taxable coverage.³

Under 25: $0.05
25 through 29: $0.06
30 through 34: $0.08
35 through 39: $0.09
40 through 44: $0.10
45 through 49: $0.15
50 through 54: $0.23
55 through 59: $0.43
60 through 64: $0.66
65 through 69: $1.27
70 and older: $2.06

The brackets step up sharply at older ages. A 64-year-old uses $0.66; crossing into the 65–69 bracket nearly doubles the rate to $1.27. These rates have been unchanged since 1999.

After-Tax vs. Pre-Tax Contributions

Only premiums you pay with after-tax dollars reduce your imputed income in Step 5. Contributions made through a cafeteria plan under Section 125 are pre-tax and do not offset the Table I value. If your entire employee-paid share runs through a cafeteria plan, the Step 5 subtraction is zero, and the Step 4 figure is your final taxable amount.

How It Shows Up on Your W-2

Your employer folds the imputed income into your year-end W-2 in four places:

Box 1, wages, tips, and other compensation, includes the imputed amount in your taxable wages.
Box 3, Social Security wages, includes it so Social Security tax applies.
Box 5, Medicare wages, includes it so Medicare tax applies.
Box 12, Code C, separately identifies the taxable cost of group-term life insurance over $50,000.

One point trips people up at filing time. Your employer is not required to withhold federal income tax on the imputed amount, even though it raises your Box 1 wages. You still owe income tax on it when you file. Social Security and Medicare taxes, by contrast, are withheld from your regular paychecks during the year.²

Situations That Change the Math

Spouse and Dependent Coverage

Employer-provided life insurance on a spouse or dependent is a separate calculation from coverage on the employee. If the face amount is $2,000 or less, it is a tax-free de minimis fringe benefit and no imputed income is calculated. Above $2,000, the cost may become taxable to the employee, using the same Table I rates but based on the covered person’s age. The $50,000 exclusion under Section 79 does not apply to spouse or dependent coverage; that exclusion covers only insurance on the employee’s own life.²⁴

Key Employees Under a Discriminatory Plan

If a group-term plan favors key employees in eligibility or benefits, those key employees lose the $50,000 exclusion entirely. Their imputed income is calculated from dollar one of coverage rather than from $50,001, and the greater of the Table I value or the actual cost of the coverage is used. A key employee is generally an officer whose compensation exceeds the Section 416(i) threshold, a more-than-5% owner, or a more-than-1% owner earning over $150,000.⁵⁶

A plan passes the nondiscrimination test if it covers at least 70% of all employees, at least 85% of participants are non-key employees, or it uses a classification the IRS finds nondiscriminatory. Rank-and-file workers keep their $50,000 exclusion even if the plan is discriminatory; only key employees are penalized.

Retirees and Other Former Employees

Coverage continued after employment ends is calculated the same way, and it remains subject to Social Security and Medicare taxes. Because there is no paycheck to withhold from, the employer reports the employee’s uncollected FICA on the W-2 in Box 12 with codes M (Social Security) and N (Medicare), and the former employee pays those amounts when filing.⁷ A retired key employee stays subject to the discriminatory-plan rule: if the plan was discriminatory during any part of the tax year, the $50,000 exclusion is lost for that entire year.⁵

1
Office of the Law Revision Counsel. 26 USC 79 Group-Term Life Insurance Purchased for Employees
2
Internal Revenue Service. Group-Term Life Insurance
3
IRS. Publication 15-B Employers Tax Guide to Fringe Benefits
4
IRS. Notice 89-110 Fringe Benefit Guidance
5
Office of the Law Revision Counsel. 26 USC 79 – Group-Term Life Insurance Purchased for Employees
6
Office of the Law Revision Counsel. 26 USC 416 – Special Rules for Top-Heavy Plans
7
Internal Revenue Service. Instructions for Form 941