PDA

View Full Version : Any tax experts? Help on imputed income?



Red in Chicago
10-10-2007, 06:57 PM
If I recall, some of you are tax guys and / or benefit reps, so can you help me understand imputed income, in non IRS lingo;)

My understanding is that any life insurance over $50k is subject to imputed income. I also am aware of the Uniform Rates Chart. My sample question is this:

Assume you have $200,000 in employer paid life insurance. You first subtract out $50,000 and get $150,000. You then divide this by 1,000 and get $150. You multiply this by the applicable rate in the above mentioned Uniform Rates Chart. Assume the rate is $0.15 and you get $22.50/month or $270 annually. What exactly does this $22.50 or $270 represent? Is it added to your regular salary and then taxed at the applicable tax rate?

Basically, I'm trying to understand why someone would not really want a large amount of employer paid life insurance just to avoid paying taxes on it. In the example above, the amount seems to small to even worry about, but I guess if someone were really old and / or had a much larger amount of insurance it could add up.

Spring~Fields
10-10-2007, 07:39 PM
http://hr.web.cmu.edu/current/insurance/life/income/

http://www.da.ks.gov/sharp/documents/Imputed%20Income.pdf

http://www.google.com/search?hl=en&sa=X&oi=spell&resnum=0&ct=result&cd=1
&q=imputed+income&spell=1

http://www.google.com/search?q=imputed+income+definition&revid=1053029251&sa=X&oi=revisions_inline&resnum=0&ct=broad-revision&cd=1

I don't know if those will lead you to a satisfactory answer or not for sure.

Hoosier Red
10-10-2007, 09:13 PM
Now these are different than when I purchase a policy through my employer right?

I get a huge amount of insurance at like $1/$100,000 of coverage, but I have to pay for it.

George Foster
10-11-2007, 12:19 AM
The reason you would not want to take out a large sum at once is because it would bump you up to a higher tax bracket and that portion is taxed at a higher tax rate. I would take out just enough to NOT push me into the next tax bracket.