What is imputed income?

Imputed income is the estimated value of goods or services that an individual receives but does not pay for directly. This can include employer-provided benefits such as health insurance, housing, company cars, and other perks. Imputed income is often calculated by assigning a fair market value to these benefits and adding them to the individual's total income.

Imputed income is important for tax purposes as it is considered taxable income by the IRS. Employers are required to report imputed income on an employee's W-2 form, and the employee must include it when filing their taxes.

It is essential to be aware of imputed income and accurately report it on tax returns to avoid penalties and potential audits. Additionally, imputed income can impact eligibility for programs such as Medicaid, Social Security benefits, and student financial aid.