Imputed income is the value of non-cash benefits that an employee receives from an employer, such as health insurance for a domestic partner or a group-term life insurance policy. Imputed income is taxable for the employee, and the employer must report it on the employee’s W-2 form. The amount of imputed income is calculated by subtracting the amount that the employee pays for the benefit from the fair market value of the benefit.
To calculate the imputed income for health insurance in Excel, we need to follow these steps:
- Enter the fair market value of the health insurance benefit in a cell, such as B2.
- Enter the amount that the employee pays for the health insurance benefit in another cell, such as B3.
- Subtract B3 from B2 and enter the formula
=B2-B3in another cell, such as B4. This is the imputed income for health insurance. - Format the cell B4 as currency and apply any tax rate or deductions as needed.
Explanation
The following table shows an example of how to calculate the imputed income for health insurance in Excel:
| Fair market value of health insurance | Employee contribution | Imputed income |
|---|---|---|
| $500 | $100 | $400 |
The formula in cell C2 is =B2-B3, which subtracts the employee contribution from the fair market value of the health insurance. The result is $400, which is the imputed income for health insurance. This amount is taxable for the employee and must be reported on the W-2 form.
Suppose an employee has a domestic partner who is not a tax dependent and receives health insurance from the employer. The fair market value of the health insurance benefit is $600 per month, and the employee pays $150 per month for the benefit. How much imputed income does the employee have for health insurance in a year?
Calculation and Result
To calculate the imputed income for health insurance in a year, we need to multiply the monthly imputed income by 12. The monthly imputed income is the difference between the fair market value of the health insurance and the employee contribution, which is $600 – $150 = $450. Therefore, the yearly imputed income is $450 x 12 = $5,400. This is the amount that the employee must pay taxes on and that the employer must report on the W-2 form.
The following table shows the calculation and result in Excel:
| Fair market value of health insurance | Employee contribution | Imputed income |
|---|---|---|
| $600 | $150 | $450 |
| x 12 | x 12 | x 12 |
| $7,200 | $1,800 | $5,400 |
