What Is GTL on Your W2? (Group-Term Life Insurance)

Group-term life (GTL) insurance is a common employer-provided benefit that offers life insurance coverage to employees. Certain amounts of GTL coverage are considered taxable income by the Internal Revenue Service (IRS). This taxable portion must be reported on an employee’s Form W-2. Understanding how GTL appears on your W-2 can clarify why your reported wages may be higher than your actual take-home pay.

Understanding Group-Term Life Insurance

Group-term life insurance is a type of life insurance policy that an employer provides to its employees. Its primary purpose is to offer a financial safety net to an employee’s beneficiaries in the event of the employee’s death. Employers typically pay the premiums for this coverage, and the amount of coverage often correlates with an employee’s salary or a flat amount for all employees.

Under Internal Revenue Code Section 79, the cost of the first $50,000 of group-term life insurance coverage provided by an employer is excluded from an employee’s taxable income. If your employer provides $50,000 or less in GTL coverage, there are no tax consequences for you as the employee.

However, if an employer provides group-term life insurance coverage that exceeds $50,000, the value of the coverage above this threshold is subject to tax. The IRS views this excess amount as a taxable benefit.

Taxation of Group-Term Life Insurance

The value of employer-provided group-term life insurance coverage exceeding $50,000 is considered “imputed income.” This means the IRS treats the value of this non-cash benefit as if you received additional wages. This imputed income increases your overall taxable income.

The calculation of this imputed income relies on the IRS Uniform Premium Table. This table provides a standardized monthly cost per $1,000 of coverage based on an employee’s age. The older an employee is, the higher the imputed cost per $1,000 of coverage. This excess amount is then multiplied by the appropriate rate from the Uniform Premium Table based on the employee’s age. Any after-tax contributions an employee makes towards the insurance reduce the amount of imputed income.

This calculated imputed income is subject to Social Security and Medicare taxes, collectively known as FICA taxes. Employers are required to withhold these taxes from your wages. While federal income tax withholding on imputed GTL income is optional for employers, the amount is still considered part of your gross income for federal income tax purposes.

Reporting Group-Term Life Insurance on Your W2

The taxable value of group-term life insurance coverage exceeding $50,000 is reported on your Form W-2. This amount will appear in multiple boxes on your W-2.

Specifically, the imputed income from GTL is included in Box 1, “Wages, tips, other compensation,” along with your regular wages. It is also part of Box 3, “Social Security wages,” and Box 5, “Medicare wages and tips,” because it is subject to FICA taxes.

The taxable cost of group-term life insurance over $50,000 is reported separately in Box 12 of your W-2, identified with Code “C.” The amount shown in Box 12, Code C, is not an addition to your wages but is already incorporated into the amounts reported in Box 1, Box 3, and Box 5. This separate reporting helps employees understand the components of their total compensation and why their taxable wages might be higher than their cash earnings.