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What Is an Imputed Income?

Reimbursement for moving expenses is imputed income.
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  • Written By: N. Madison
  • Edited By: Jenn Walker
  • Last Modified Date: 11 September 2014
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Imputed income is a value that is considered part of a person’s income, even though the individual doesn't receive this value in cash form. For example, this type of income is often received in the form of a non-cash benefit. An employer may give an employee a vehicle that he can use not only during work hours, but also during his time off. Since the vehicle is his to use for personal reasons, this benefit may be considered part of the employee's imputed income.

Sometimes, imputed income is added to a person’s overall income for the purpose of coming up with a more realistic wage calculation. For example, non-cash compensation may be included in calculations of a person’s taxable wages in some places. In turn, it may be used to evaluate how much should be withheld for taxes. It may be used in calculating other types of withholdings as well.

In some countries, the person who receives a non-cash benefit or compensation may be responsible for paying taxes on this type of income. These amounts are typically included on tax forms that are filed with the tax authority in the employee’s jurisdiction. If this income is not included on required tax forms, the forms may be considered inaccurate. The laws regarding imputed income may vary from place to place, however.

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There are many types of imputed income a person may receive. Besides the perk of using a company car for personal transportation, a person may receive reimbursement for moving expenses that are typically not deductible; he may also receive a significant amount of term life insurance coverage, adoption expense assistance, or even assistance paying for dependent care. It’s important to note that some types on non-cash benefits may not be considered taxable imputed income. For example, a person may receive dependent care assistance that is tax free up to a certain amount. If the dependent care assistance passes the tax-free threshold, however, the excess amount may be considered taxable imputed income.

In some cases, the term imputed income is used in an entirely different manner. Sometimes it is used in child support cases in which a judge believes a parent has deliberately become unemployed or underemployed for the purpose of lowering his child support payments. In such a case, the judge may impute a reasonable amount of income to that parent. This basically means the judge evaluates child support obligations based on the amount of income he believes that parent should have.

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