Understanding Imputed Income from Domestic Partner's Health Insurance Coverage
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If you are in a domestic partnership and are about to be added to your partner's employee sponsored health insurance coverage, you may have some questions about how this will affect your taxes. One issue that often comes up is imputed income, which is when the value of your health insurance coverage is added to your partner's salary as taxable income. This can be a confusing concept, especially if you live in a state like New York City where there may be additional taxes involved. In this blog post, we will discuss what imputed income is, how it is taxed, and why it is important to consult with a tax advisor before making any decisions regarding your taxes.
What is Imputed Income?
Imputed income is the value of any non-cash benefits that you receive from your employer, such as health insurance coverage for a domestic partner, that is considered taxable income by the Federal government. In the eyes of the IRS, if you are not considered a legal dependent of your partner, then their employer-provided health insurance coverage for you is seen as an additional form of compensation and therefore must be taxed.