Imputed Income Definition

IRS uses the term ‘imputed income’ to refer to the value of a cash or non-cash employee benefit that must be treated as income to calculate federal taxes.

Imputed Income Extended Definition
Employees’ earned income (cash or non-cash compensation) is subject to income taxes and employment taxes (Medicare and Social Security.

The value of the benefits received can sometimes be more than the tax deductions allowed on them. The difference between the two amounts is the imputed income.

Employers are required to report employees’ imputed income on Form W-2. Imputed income is typically not subject to federal income tax withholding, but it is subject to FICA (Social Security and Medicare) tax withholding.

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Last Updated By

Rachel Blakely-Gray | Apr 27, 2023