Imputed income

What is imputed income?

Imputed income refers to the estimated value of non-monetary benefits or services (also known as fringe benefits) that an employee receives, which are not part of the employee's salary or wages but are subject to taxation. Imputed income can include various forms of compensation or benefits that are not received as direct cash payments. Even though the employee might not pay for these benefits, they must still pay tax on their value.

It's important to note that tax laws and regulations regarding imputed income can vary by jurisdiction, and not all forms of imputed income are subject to taxation. Individuals should consult with a tax professional or refer to relevant tax guidelines in their area to determine how imputed income is treated and whether it is taxable.

Examples of imputed income

Depending on the employment laws in your jurisdiction, some of the following benefits are subject to taxation depending on their value, while the government taxes others regardless of the benefit's value.

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 (such as a gym membership)

• Health-related benefits (such as a CPR course)

• Moving expense reimbursement

• Group-term life insurance (over a certain threshold)

• Dependent care assistance (over a certain threshold)

• Education assistance (over a certain threshold)

• Adoption assistance (over a certain threshold)

• Debt forgiveness

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 cell phone

• Occasional meals

• Retirement planning services