Author Topic: mad about taxes on benefit I can't refuse..  (Read 1267 times)

mistymoney

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mad about taxes on benefit I can't refuse..
« on: February 04, 2025, 08:35:01 AM »
wanted to get your take on this. I have a pretty decent benefits package at work, and I am grateful for it. But there is one benefit with a tough to swallow tax bite - and I was told I can't refuse it?

I'm sure it used to be optional, but I planned to dump it this year and it was not optional (I used to have to tic a box saying I accept - but not this year).

This is 2xsalary company paid life and ADD. I think I am pretty FI these days, and my children are no longer dependents, and I don't think I need it and while "free" it costs in taxes.

Since I am older and my salary higher, I have to pay the difference between 50k in life insurance which is free, and my 2xsalary level, and it is nearly 100/paycheck. I'm in the 24% bracket these days, so this is costing me $600/year. Since I don't need or want it, it is pretty annoying that HR told me there is no opting out and it is free. $600 taxes is not free, imo. I feel like I could get a better benefit paying 50/month for my own insurance, but again - I no longer need insurance. Would have better uses for this $600.

Would you be upset about this too?

mistymoney

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Re: mad about taxes on benefit I can't refuse..
« Reply #1 on: February 04, 2025, 08:54:28 AM »
actually over 700/yr, as I forgot state income taxes too!

Morning Glory

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Re: mad about taxes on benefit I can't refuse..
« Reply #2 on: February 04, 2025, 08:57:32 AM »
It may help to think of it as a cost of employment that will go away when you fire, as you would uniforms or commuting costs. YMOYL and some of the early mmm articles talk about accounting for these expenses as "less income " instead of "spending ".

dcheesi

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Re: mad about taxes on benefit I can't refuse..
« Reply #3 on: February 04, 2025, 09:00:34 AM »
Been this way for years at my company, though the hit to my paycheck/taxes is lower than yours (I can't recall if the coverage level is lower, or maybe I just make less money lol). I remember getting a notice about this back it first became taxable, many years ago (before that I guess it was truly "free").

mistymoney

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Re: mad about taxes on benefit I can't refuse..
« Reply #4 on: February 04, 2025, 10:32:32 AM »
Been this way for years at my company, though the hit to my paycheck/taxes is lower than yours (I can't recall if the coverage level is lower, or maybe I just make less money lol). I remember getting a notice about this back it first became taxable, many years ago (before that I guess it was truly "free").

Life insurance is a lot more expensive as you get older, I think that is why mine is high.

And it is an expensive product apparently - seems I could get similar coverage myself for 1/3 the price they are putting on paystub. Supposedly pooling lowers costs, but not always.

Glad to hear that I am not missing any details anyway and that it seems a lot of employers do this. I guess I will just try to be content with the extra benefits to my heirs should I die in office....

Morning Glory

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Re: mad about taxes on benefit I can't refuse..
« Reply #5 on: February 04, 2025, 11:24:06 AM »
I had a job once where it was itemized as "excess life" with no explanation. Had to dig into the HR website to figure it out.

terran

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Re: mad about taxes on benefit I can't refuse..
« Reply #6 on: February 04, 2025, 11:41:09 AM »
I don't know if this will make you feel any better, but the amount they're adding to your taxable income for this isn't up to your company, it's set by the IRS based on the amount of insurance and your age ranging from $0.05 per $1000 of coverage over the $50,000 limit for under 25 years old to $2.06 per $1000 for 70 and over per month of coverage.

Of course, this will probably make you feel worse: you're likely also paying FICA on this, so that's another 7.65 if you're under the social security way base and 1.45% if you're over.

dcheesi

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Re: mad about taxes on benefit I can't refuse..
« Reply #7 on: February 04, 2025, 02:07:41 PM »
Been this way for years at my company, though the hit to my paycheck/taxes is lower than yours (I can't recall if the coverage level is lower, or maybe I just make less money lol). I remember getting a notice about this back it first became taxable, many years ago (before that I guess it was truly "free").

Life insurance is a lot more expensive as you get older, I think that is why mine is high.

And it is an expensive product apparently - seems I could get similar coverage myself for 1/3 the price they are putting on paystub. Supposedly pooling lowers costs, but not always.

Glad to hear that I am not missing any details anyway and that it seems a lot of employers do this. I guess I will just try to be content with the extra benefits to my heirs should I die in office....
Hmm, you could be onto something; looks like my "GTL" per paycheck has crept up a bit compared to what I remembered, though still a lot less than yours.

terran

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Re: mad about taxes on benefit I can't refuse..
« Reply #8 on: February 04, 2025, 02:42:31 PM »
Hmm, you could be onto something; looks like my "GTL" per paycheck has crept up a bit compared to what I remembered, though still a lot less than yours.

Imputed income from life insurance over $50,000 will increase every five years, for the most part, becoming much more significant as you get older. From Publication 15-b:

Table 2-2. Cost Per $1,000 of Protection 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 older ............................... 2.06

DeniseNJ

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Re: mad about taxes on benefit I can't refuse..
« Reply #9 on: February 06, 2025, 08:38:58 AM »
I had a job once where it was itemized as "excess life" with no explanation. Had to dig into the HR website to figure it out.

LOL.

 

Wow, a phone plan for fifteen bucks!