What Is Box 12C on a W-2? Group-Term Life Insurance Reporting

Code C in Box 12 on a W-2 reports the taxable cost of employer-provided group-term life insurance coverage above $50,000. It’s imputed income: your employer didn’t pay you cash, but the IRS treats the value of the extra coverage as wages. The amount next to Code C is already included in your Box 1, Box 3, and Box 5 wages, so you don’t add it to your income again when you file.

Why the Number Appears on Your W-2

Federal law makes the first $50,000 of group-term life insurance your employer provides tax-free.¹ Only the cost of coverage above that line is taxable. If your employer gives you a $150,000 policy, the taxable calculation runs on $100,000 of excess coverage, not the full face amount.

The $50,000 threshold is fixed. It doesn’t adjust for inflation, and it doesn’t change with your salary, age, or filing status. Any after-tax contributions you make toward the premium reduce the imputed income dollar-for-dollar.¹

One small detail on placement: Code C can sit in any of the four Box 12 slots (12a through 12d). The letter after “Box 12” just identifies the line the employer used, not a different kind of reporting.²

How the Code C Dollar Amount Is Calculated

The taxable cost isn’t tied to what your employer actually pays the insurer. Everyone uses the same IRS rate table, called the Uniform Premium Table (Table I).³ The rates are often lower than the real premium, which usually helps you.

Table I assigns a monthly cost per $1,000 of excess coverage based on your age on the last day of the tax year:⁴

Under 25: $0.05 per $1,000
25–29: $0.06 per $1,000
30–34: $0.08 per $1,000
35–39: $0.09 per $1,000
40–44: $0.10 per $1,000
45–49: $0.15 per $1,000
50–54: $0.23 per $1,000
55–59: $0.43 per $1,000
60–64: $0.66 per $1,000
65–69: $1.27 per $1,000
70 and older: $2.06 per $1,000

The rates climb steeply after 50. A 62-year-old with $100,000 in excess coverage picks up $792 of imputed income for the year ($0.66 × 100 × 12). A 35-year-old with the same excess coverage picks up $108. If your employer’s plan is tied to a salary multiple, an older employee can see the Code C number jump significantly from one birthday to the next.

A Worked Example

Suppose you’re 47 on December 31 and your employer provides $200,000 of group-term life insurance. You also contribute $10 per month after-tax toward the premium.

Excess coverage: $200,000 − $50,000 = $150,000
Monthly imputed cost: 150 × $0.15 = $22.50
Annual imputed cost: $22.50 × 12 = $270.00
Less after-tax contributions: $270.00 − $120.00 = $150.00

Your W-2 would show $150.00 next to Code C in Box 12, and that $150 would already be inside your Box 1, Box 3, and Box 5 wages.

What to Do With Code C on Your Tax Return

Nothing extra. Your employer has already added the Code C figure to Box 1 (federal taxable wages), Box 3 (Social Security wages), and Box 5 (Medicare wages).² Code C is disclosure, not a separate line item to enter on your Form 1040.

Because the amount sits in Boxes 3 and 5, Social Security tax (6.2%) and Medicare tax (1.45%) have already been withheld from your paychecks against it.³ Federal income tax withholding on the imputed amount is optional for the employer. Most payroll systems roll it into regular withholding, but if yours doesn’t, you could owe a bit more at filing time.⁴

If your total Medicare wages pass $200,000 in the year, the imputed income is also subject to the 0.9% Additional Medicare Tax. Your employer begins withholding it once wages cross $200,000, regardless of your filing status; the actual liability turns on the $200,000 single or $250,000 joint threshold when you file.⁵

Situations Where the Normal Rule Doesn’t Apply

A few groups don’t get the ordinary Code C treatment, and it’s worth knowing whether one describes you.

More-than-2% S-corporation shareholders. If you own more than 2% of an S-corp’s stock, the $50,000 exclusion doesn’t apply. The IRS treats you like a partner for fringe benefit purposes, and the entire cost of employer-provided group-term life insurance is taxable and reportable on your W-2.⁴

Coverage on your spouse or dependents. Employer-paid life insurance on a spouse or dependent has a much lower cutoff. If the face amount is $2,000 or less, it’s a de minimis fringe benefit and excluded entirely. Above $2,000 on a spouse or dependent, the coverage generally becomes taxable income to you.³

Retirees and former employees. Section 79 treats a former employee as an employee, so a retiree who keeps employer-paid coverage above $50,000 still has imputed income, reported by the former employer on a W-2 even without wages.¹ If you left the employer and are disabled within IRC Section 72(m)(7), the imputed income is excluded from your gross income; the first year requires substantiation attached to your return, including a doctor’s statement and a personal statement about the impairment, with a simple declaration in later years.⁶

Key employees under a discriminatory plan. If the employer’s plan favors key employees, those key employees lose the $50,000 exclusion entirely, and the taxable amount becomes the greater of the Table I cost or the employer’s actual premium.¹ Key employee status carries into retirement.

1
Office of the Law Revision Counsel. 26 USC 79 – Group-Term Life Insurance Purchased for Employees
2
Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026) – Specific Instructions for Form W-2
3
Internal Revenue Service. Group-Term Life Insurance
4
Internal Revenue Service. 2026 Publication 15-B – Employers Tax Guide to Fringe Benefits
5
Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
6
eCFR. 26 CFR 1.79-2 – Exceptions to the Rule of Inclusion