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Employer-Provided Group-Term Life Insurance: Taxable and Nontaxable Income (2025 IRS Guide)

This guide covers “Employer-Provided Group-Term Life Insurance” within taxable and nontaxable income. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 525 (2025), Taxable and Nontaxable Income, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay FMV for them or they’re specifically excluded by law. Refraining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules.

See Valuation of Fringe Benefits, later in this discussion, for information on how to determine the amount to include in income.

Employer-Provided Group-Term Life Insurance

In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) isn’t included in your income. However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance.

For exceptions to this rule, see Entire cost excluded and Entire cost taxed, later.

If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of Form W-2. Also, it’s shown separately in box 12 with code C.

Group-term life insurance.

This insurance is term life insurance protection (insurance for a fixed period of time) that:

  • Provides a general death benefit,

  • Is provided to a group of employees,

  • Is provided under a policy carried by the employer, and

  • Provides an amount of insurance to each employee based on a formula that prevents individual selection.

Permanent benefits.

If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Your employer should be able to tell you the amount to include in your income.

Accidental death benefits.

Insurance that provides accidental or other death benefits but doesn’t provide general death benefits (for example, travel insurance) isn’t group-term life insurance.

Former employer.

If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Also, it’s shown separately in box 12 with code C. Box 12 will also show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. You must pay these taxes with your income tax return. Include them on Schedule 2 (Form 1040), line 13. For more information, see the Instructions for Form 1040.

Two or more employers.

Your exclusion for employer-provided group-term life insurance coverage can’t exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 won’t be correct. You must figure how much to include in your income. Reduce the amount you figure by any amount reported in box 12 of Form W-2, with code C; add the result to the wages reported in box 1; and report the total on your return.

Figuring the taxable cost.

Use the following worksheet to figure the amount to include in your income.

If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you would otherwise include in your income. However, you can’t reduce the amount to include in your income by:

  • Payments for coverage in a different tax year;

  • Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions; or

  • Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded.

Worksheet 1. Figuring the Cost of Group-Term Life Insurance To Include in Income (Keep for Your Records)

1. Enter the total amount of your insurance coverage from your employer(s) 1. _____
2. Limit on exclusion for employer-provided group-term life insurance coverage 2. 50,000
3. Subtract line 2 from line 1 3. _____
4. Divide line 3 by $1,000. Figure to the nearest tenth 4. _____
5. Go to Table 1. Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. _____
6. Multiply line 4 by line 5 6. _____
7. Enter the number of full months of coverage at this cost 7. _____
8. Multiply line 6 by line 7 8. _____
9. Enter the premiums you paid per month 9. _____
10. Enter the number of months you paid the premiums 10. _____
11. Multiply line 9 by line 10 11. _____
12. Subtract line 11 from line 8. Include this amount in your income as wages 12. _____

Table 1. Cost of $1,000 of Group-Term Life Insurance for 1 Month

Age Cost
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 above 2.06

Example 3.

You’re 51 years old and work for two employers, Green Company and Maple Company. Both employers provide group-term life insurance coverage for you for the entire year. Your coverage is $35,000 with Green Company and $45,000 with Maple Company. You pay premiums of $4.15 a month under the Maple Company group plan. You figure the amount to include in your income as follows.

Worksheet 1. Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated

1. Enter the total amount of your insurance coverage from your employer(s) 1. 80,000
2. Limit on exclusion for employer-provided group-term life insurance coverage 2. 50,000
3. Subtract line 2 from line 1 3. 30,000
4. Divide line 3 by $1,000. Figure to the nearest tenth 4. 30.0
5. Go to Table 1. Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. 0.23
6. Multiply line 4 by line 5 6. 6.90
7. Enter the number of full months of coverage at this cost 7. 12
8. Multiply line 6 by line 7 8. 82.80
9. Enter the premiums you paid per month 9. 4.15
10. Enter the number of months you paid the premiums 10. 12
11. Multiply line 9 by line 10 11. 49.80
12. Subtract line 11 from line 8. Include this amount in your income as wages 12. 33.00

The total amount to include in income for the cost of excess group-term life insurance is $33. Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 don’t include any part of that $33. You must add it to the wages shown on your Forms W-2 and include the total on your return.

Entire cost excluded.

You aren’t taxed on the cost of group-term life insurance if any of the following circumstances apply.

  1. You’re permanently and totally disabled and have ended your employment.

  2. Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year.

  3. A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. (You aren’t entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy.)

  4. The plan existed on January 1, 1984, and:

    1. You retired before January 2, 1984, and were covered by the plan when you retired; or

    2. You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983.

Entire cost taxed.

You’re taxed on the entire cost of group-term life insurance if either of the following circumstances applies.

  • The insurance is provided by your employer through a qualified employees’ trust, such as a pension trust or a qualified annuity plan.

  • You’re a key employee and your employer’s plan discriminates in favor of key employees.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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