What Is Imputed Income? Meaning And Definition

0
213
what is imputed income

Here we will discuss What Is Imputed Income? And imputed income definition and imputed income benefits. And what is included in imputed income and what is not? So, let us first discuss what is imputed income? And its definition.

What Is Imputed Income?

The imputed income is the additional value to cash or non-cash employee compensation. So, it is the value of benefits or services which are given to an employee. So, in simple terms, it is the value of non-monetary compensation which is provided to the employees in the form of fringe benefits.

The definition of imputed income is termed as the amount of benefit received by the employee which is not part of their salary or wages but still gets taxed as a share of their income. Here, the employee does not need to pay taxes for giving those benefits, but the employee needs to. Although, there are some benefits such as health insurance or meals which are exempted from tax.

So, the imputed income meaning is clear as these are the extra perks and benefits provided to the employee above their salary or wages, and they are not in form of cash. So, we referred to these noncash benefits as imputed income benefits.

The employees need to pay taxes on imputed incomes as per the imputed income tax rate decided by the government, where the employees must include the imputed income in the employee’s form W-2 for tax purposes.

For More Infomation Visit FinancenInsurance.

Examples Of Imputed Income

Some examples of imputed income include:

  • Non-deductible moving expense reimbursements
  • Gym memberships and fitness incentives
  • Personal use of a company car
  • Educational assistance and reduction of tuition
  • Wage earner discounts
  • Personal use of employer car
  • Adoption assistance in excess of the tax-free amount
  • Group-term life insurance in excess of $50,000
  • Care assistance for dependents in excess of the tax-free amount

Items Excluded From Imputed Income:

Here are some examples of Items Excluded from Imputed Income:

  • Health insurance for dependents
  • Health savings accounts
  • Dependent care assistance provided under $ 5,000
  • Group term life insurance provided under $ 50,000
  • Education assistance provided 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

How Do You Calculate Imputed Income?

As imputed income is taxable so you need to calculate it too. So, you should know the fair market value (FMV) of the benefits offered to the employees, which must be reported to the IRS as taxable income.

Thus, you need to compute the variance between your company’s cost of an employee which is the only monthly premium given or provided to the employee, and the cost of an employee which is in addition to one monthly premium. Then multiply the computed difference amount by 12 which will give you the impute income.

FAQ

How Does Imputed Income Affect Tax Return?

Imputed income is added to your or the employees’ taxable income unless exempted in specific cases. Although, you do not include this imputed income in net pay as the employee has received the additional benefit already. Therefore, in the employee’s Form W-2 , it is included by the employee as taxable income.

Is That A Gym Membership Fringe Benefit?

Yes, a gym membership is considered a fringe benefit or imputed income, but in order to be considered as or the imputed income, it should be added to the employee’s gross pay.

How Do You Calculate Imputed Income?

As imputed income is taxable so you need to calculate it too. So, you should know the fair market value (FMV) of the benefits offered to the employees, which must be reported to the IRS as taxable income.

Thus, you need to compute the variance between your company’s cost of an employee which is the only monthly premium given or provided to the employee, and the cost of an employee which is in addition to one monthly premium. Then multiply the computed difference amount by 12 which will give you the impute income.

Can You Write Off Imputed Income?

The imputed income is reported to the IRS as it is taxable income as well as a benefit that is not eligible for the purpose of tax deduction. But, still, your wages or salary remains the same. So, it can be written off only when you do not avail of the additional benefits provided by the employer.

Conclusion

Thus, by now we know what is imputed income? And imputed income definition and imputed income benefits. And what is included in imputed income and what is not? The imputed income is the additional value to cash or non-cash employee compensation. So, it is the value of benefits or services which are given to an employee.

So, in simple terms, it is the value of non-monetary compensation which is provided to the employees in the form of fringe benefits. These are the extra perks and benefits provided to the employee on above their salary or wages, and they are not in form of cash. So, we referred to these non cash benefits as imputed income benefits. So, we successfully explained what is imputed income?

Tags

What is imputed income?

Leave a reply