What Is Imputed Income from Employee Benefits?

Imputed income is the fair market value of non-cash benefits or perks provided by an employer that the IRS treats as taxable compensation, even though the employee doesn't receive the benefit as cash. Common examples include employer-provided group term life insurance coverage above $50,000, personal use of a company car, certain fringe benefits, and employer contributions to domestic partner health coverage (since domestic partners are generally not treated as tax dependents). The IRS requires employers to calculate and report imputed income on the employee's W-2, and it's subject to income tax withholding and FICA taxes just like regular wages. Employees are sometimes surprised to see imputed income on their W-2 and end up paying taxes on benefits they didn't realize were taxable. Unlike wages, the employee doesn't receive the imputed income as cash — they simply owe tax on the value of the benefit they received.