What is imputed income?
Imputed income refers to the value of the non-monetary benefits that an employee receives. This income is not received in the form of cash, but through a benefit that has quantifiable value, such as a company vehicle or a gym membership.
These benefits are paid for by the employer and are separate from an employee’s ordinary wage or pay. Though employees do not pay for these benefits, they are considered as taxable income.
Note that some benefits are only taxed once they exceed a specific monetary threshold. In the US, for example, group-term life insurance is only taxed as imputed income once it exceeds $50,000 in value.
Low-value perks, such as small gifts and meals, typically do not count as imputed income.
Examples of imputed income
Common examples of imputed income include:
Employer-provided benefits
These are the benefits an employer may provide to its employees, such as:
- Housing
- The use of company cars
- Meals
- Fitness benefits
- Health-related benefits
- Relocation reimbursement
- Group-term life insurance
- Dependent care assistance
- Education assistance
- Adoption assistance
- Education, tuition, and debt relief
In some countries, many employer-provided benefits are tax-exempt up to a certain threshold. In such a case, the employee is responsible for paying tax on the portion of the benefit's value that exceeds the government's threshold.
Employee discounts
If employees receive discounts on goods or services provided by their employer, the value of those discounts can be considered imputed income.
Barter transactions
In cases where services are exchanged or bartered, the fair market value of the goods or services received may be considered imputed income.
Rental value of owner-occupied property
If you live in a property you own, the fair market rental value of that property may be considered imputed income for tax purposes.
Common exclusions to imputed income
Some employee fringe benefits are tax-exempt and therefore excluded as imputed income, such as:
- Gifts, such as gift cards, movie tickets, and company-branded merchandise
- Health savings accounts
- Health insurance for the employee and their dependents
- Accident insurance
- Group term life insurance under a certain threshold
- Dependent care assistance under a certain threshold
- Education assistance under a certain threshold
- Adoption assistance under a certain threshold
- Employer-provided mobile phone
- Occasional meals
- Retirement planning services