Can anyone explain why Group Life insurance provided by an employer is taxable as "income?" I can understand if my employer paid for all of my health insurance or provided me with a car (not job related) as they have immediate value to me and I benefit directly from them. Is it the disability aspect of the plan that causes it to be considered taxable?
Group life insurance taxable as "income"
- Thread starter herdfan06
- Start date
Its considered a taxable fringe benefit if it is over 50k is why. You have to calculate the portion over 50k.
Yes it does because the IRS considers it to be employer provided if it is, which is the entire reason that it would be taxed over the 50k.
I meant that comment in regards to my taxable income, my 401(k) and Health Insurance have a decent impact on reducing my taxable income, whether or not the AD&D is pre-tax or post-tax has no noticeable impact on my taxable income.
I do appreciate your input on this and the information you are providing; however, I think you are missing my original question. I am confused as to why this is considered a taxable benefit in the first place, at least taxable to me.
It's taxable because it has a monetary value to you. If you don't want to be taxed, you could turn down the benefit and buy the same policy with your own after tax money. Of course that would cost you a lot more than the taxes, hence how it is a benefit of monetary value to you. You don't have to pay the premiums, only the taxes on the amount of the premiums paid on your behalf.
It is not that I am worried or upset about the taxes. I just think it would make more sense if the person receiving the benefit (assuming I die while employed) was taxed on it. I do see your point that I am saving a lot of money by having it provided to me and literally paying pennies, there is no way I would be able to purchase a plan for that cheap; however, I am only eligible for it while I am employed, obviously my employer is not going to give me AD&D for free for life. Where I potentially benefit directly is if I were to become dismembered/disabled, assuming I met the qualifications.
