What Is Imputed Income?
The definition of imputed income is benefits employees receive that aren’t part of their salary or wages (like access to a company car or a gym membership) but still get taxed as part of their income. The employee may not have to pay for those benefits, but they are responsible for paying the tax on the value of them. In the example of the company car, employees would have to pay taxes on the amount it would cost to lease that same car. Some benefits employees receive are excluded and tax-exempt, such as health insurance or meals.
What Are Examples of Imputed Income?
Many fringe benefits may be taxed depending on the value of the benefit received by the employee. Other benefits are taxed regardless of the monetary amount. Here are some examples:
- Use of a company or employer car
- Fitness benefits, like a free gym membership
- Dependent care assistance exceeding $5,000
- Group-term life insurance exceeding $50,000
- Moving expense reimbursement
- Education assistance exceeding $5,250
- Adoption assistance exceeding the annually adjusted amount
- Some employer gifts, mostly cash and gift cards
- Health insurance for non-dependents, such as a domestic partner
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What Is Excluded from Imputed Income?
In general, excluded benefits are those that are below a certain value threshold or qualify for special treatment, as in the case of health insurance for dependents. Here are some examples:
- Health insurance for dependents
- Health savings accounts
- Dependent care assistance under $5,000
- Group term life insurance under $50,000
- Education assistance under $5,250
- Adoption assistance below the annually adjusted amount
- Small or occasional employer gifts, like movie tickets, birthday cake, or a company t-shirt
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