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Thread: Any tax experts? Help on imputed income?

  1. #1
    Oy Vey! Red in Chicago's Avatar
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    May 2000
    Chicago Suburbs

    Any tax experts? Help on imputed income?

    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.

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  3. #2
    Member Spring~Fields's Avatar
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    Sep 2001
    Last edited by Spring~Fields; 10-10-2007 at 06:42 PM.

  4. #3
    Join Date
    Apr 2001
    Indianapolis, IN

    Re: Any tax experts? Help on imputed income?

    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.
    Quote Originally Posted by BuckeyeRed27 View Post
    Honest I can't say it any better than Hoosier Red did in his post, he sums it up basically perfectly.

  5. #4
    Best Uniforms EVER! George Foster's Avatar
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    Aug 2005

    Re: Any tax experts? Help on imputed income?

    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.
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