Imputed income is the monetary value of non-cash benefits or compensation that employees receive from their employer, which is considered taxable income by the IRS. These non-cash benefits are also known as fringe benefits. Even though employees might not receive cash directly, the value of certain benefits must be reported as part of their gross taxable income and is subject to employment taxes such as Social Security, Medicare, and federal income tax. Examples of imputed income include:

• Personal use of a company car
• Gym memberships
• Employee discounts
• Health insurance for non-dependents (such as a domestic partner)
• Gift cards
• Adoption assistance exceeding certain limits

Some smaller benefits under a certain value (usually less than $100) are considered de minimis and may be excluded from taxable income. Employers must report imputed income on employees’ W-2 forms, and employees pay taxes on this value similar to how they do on their salary. In contrast, some work-related benefits or reimbursements, like certain educational expenses or health insurance for dependents, may be excluded from imputed income. In summary, imputed income represents the taxable value of non-cash benefits provided to employees, which increases their taxable earnings beyond their salary or wages. This ensures proper taxation on the full value of employee compensation.