Under federal tax rules, you will pay taxes on the amount of life insurance above $50,000. The IRS calls this taxable portion "imputed income." To calculate the amount for your specific income, use the table on page 15 of the IRS Employer’s Guide to Fringe Benefits for Use in 2025. The table shows the tax on income per $1,000 of basic life insurance above $50,000.
Effective Jan. 1, 2025 the maximum value of the State’s Basic Life insurance increased to $200,000. This table shows examples of imputed income across age groups and the value of life insurance. Under the increased maximum benefit, the table shows an increase in taxable income for employees earning above $95,000 annually.
If you wish to decline this benefit, submit the Request to Waive Taxable Life Insurance Benefit form to SEGIP. If you want to reinstate the benefit, send this form to SEGIP.
You can see your current increase in taxable income in your paycheck’s “Employer Paid Benefits” section. You’ll also find it in Box 12C on your W-2 form.
The image below shows the section of a paycheck where an employee's basic life insurance is taxed—the example of a 52-year-old employee with a basic life insurance policy valued at $95,000.
