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sherryprier60
New Member

Imputed income domestic partner

I have included my partner on my insurance and see an amount of 343.96 on my paystub. Can I get reimbursed for this on my taxes? How is this affecting me?
1 Best answer

Accepted Solutions
DawnC0
Intuit Alumni

Imputed income domestic partner

Only if you are claiming your partner as a dependent on your tax return (lived with you all year, and earned less than $4,200 in 2019).  If you are, then you may claim an itemized deduction for any premiums paid with post-tax dollars under the medical expenses section.  However, keep in mind that this deduction is limited by 10% (7.5% for tax years 2017 - 2019) of your adjusted gross income (a subtotal on your tax return) so you may not see any change in your tax situation unless you have substantial expenses. Here is an explanation of how this imputed income works:

You are in a situation called "imputed income."  If you get married, your spouse is entitled to certain tax-free employee benefits.  Or, if your domestic partner (DP) can be your tax dependent, their benefits can be tax-free.  But because your DP is not your spouse nor your dependent, your employer can't provide tax-free benefits for them.

Let's say as an example, you have single health insurance that costs you $100 per month and your employer pays an additional $400 per month.  Your premium is pre-tax, and your employer's share is deductible on their corporate tax return.  To add a domestic partner who is not entitled to tax-free benefits, the employer charges you an extra $100 for your share of their premium, but this is an after-tax deduction.  The employer pays their $400 share, but because it can't be tax-free, it is considered taxable income to you, as if you had gotten a $400 per month raise and used it to pay the insurance premiums.  The employer will withhold extra income tax and extra social security tax from your paycheck as if you had received a $400 raise. 

As a result, your take-home pay will go down, possibly by quite a lot (up to 40% of the value of the benefit, depending on your tax bracket and the state you live in.)   Your W-2 at the end of the year will show an increased salary, again because the tax effect of DP's benefits is the same as if you got a raise and paid for the benefits yourself.   Your W-2 will show the value of benefits as additional box 1 income, "imputed income".

The extra withholding that will be taken out of your check should cover the tax you owe so you should not see a large tax bill next year, but you will see a decrease in your take-home pay.

 

This does not apply if your domestic partner can be your tax dependent (lives with you all year, and earns less than $4,200 for 2019).  And the issue of imputed income stops if you get married, as soon as you tell your employer, so they can switch the person over to spousal tax-free plan.

 

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17 Replies
DawnC0
Intuit Alumni

Imputed income domestic partner

Only if you are claiming your partner as a dependent on your tax return (lived with you all year, and earned less than $4,200 in 2019).  If you are, then you may claim an itemized deduction for any premiums paid with post-tax dollars under the medical expenses section.  However, keep in mind that this deduction is limited by 10% (7.5% for tax years 2017 - 2019) of your adjusted gross income (a subtotal on your tax return) so you may not see any change in your tax situation unless you have substantial expenses. Here is an explanation of how this imputed income works:

You are in a situation called "imputed income."  If you get married, your spouse is entitled to certain tax-free employee benefits.  Or, if your domestic partner (DP) can be your tax dependent, their benefits can be tax-free.  But because your DP is not your spouse nor your dependent, your employer can't provide tax-free benefits for them.

Let's say as an example, you have single health insurance that costs you $100 per month and your employer pays an additional $400 per month.  Your premium is pre-tax, and your employer's share is deductible on their corporate tax return.  To add a domestic partner who is not entitled to tax-free benefits, the employer charges you an extra $100 for your share of their premium, but this is an after-tax deduction.  The employer pays their $400 share, but because it can't be tax-free, it is considered taxable income to you, as if you had gotten a $400 per month raise and used it to pay the insurance premiums.  The employer will withhold extra income tax and extra social security tax from your paycheck as if you had received a $400 raise. 

As a result, your take-home pay will go down, possibly by quite a lot (up to 40% of the value of the benefit, depending on your tax bracket and the state you live in.)   Your W-2 at the end of the year will show an increased salary, again because the tax effect of DP's benefits is the same as if you got a raise and paid for the benefits yourself.   Your W-2 will show the value of benefits as additional box 1 income, "imputed income".

The extra withholding that will be taken out of your check should cover the tax you owe so you should not see a large tax bill next year, but you will see a decrease in your take-home pay.

 

This does not apply if your domestic partner can be your tax dependent (lives with you all year, and earns less than $4,200 for 2019).  And the issue of imputed income stops if you get married, as soon as you tell your employer, so they can switch the person over to spousal tax-free plan.

 

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csbutterworth
New Member

Imputed income domestic partner

There is conflicting info on this.  

After hours spent researching this - this is the test that my company uses to determine tax dependency for the purposes of domestic partner coverage (ie avoiding imputed income/fringe benefits being reported on your W2). .... note how gross income is not a test.

1. We live together. (We share our permanent residence for full taxable year, except for temporary absences for reasons such as vacation, military service, or education. In other words, the associate and the partner must live together from January 1 through December 31.).
2. The associate’s partner is a citizen or resident of the U.S.
3. The associate’s partner receives more than half his or her support from the associate. (The rules for determining support are complicated and are more involved than just determining who is the “primary breadwinner.” The IRS provides a worksheet in Publication 17 which you can use to determine whether you provide more than half your partner’s support.)

Lots of conflicting info about the gross income test and whether or not it applies, but there are credible publications in academic journals and IRS publications to the contrary.

csbutterworth a few seconds ago
kjanssen
New Member

Imputed income domestic partner

I have a follow-up question to this: I am in this exact situation and was told by my employer that regardless of if we get married during the tax year in question we will still need to pay taxes on the imputed income incurred up until the marriage date. Can you confirm this?

 

I was under the impression that tax-wise, marriage counts for the whole year as long as it happens before Dec 31, but I could see this being a special case because it involves the company paying for a benefit on my behalf.

joegregory10
New Member

Imputed income domestic partner

Did you ever get an answer to this question?

 

"I was under the impression that tax-wise, marriage counts for the whole year as long as it happens before Dec 31, but I could see this being a special case because it involves the company paying for a benefit on my behalf."  

 

Because basically there is a financial incentive to get married sooner then.

JosephF8
Expert Alumni

Imputed income domestic partner

Yes, you will have included in your W-2 the higher amounts.

Your company has already paid for these benefits through the imputed income.

If you are Married Filing Jointly at the end of the year you will likely be paying taxes at a lower rate.

This way you may recover some of this.

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Jlcalore
Level 2

Imputed income domestic partner

Hello! I have tried calling the IRS, calling TurboTax which does not have customer service reps anymore (...even though I upgraded to the deluxe etc.), and still can’t find an answer to this question...

2019 was the first year I have ever added my domestic partner of 14 years to my health insurance benefits through my job with the state. On my W-2 I see that the “imputed income” figure is in box 14.
As I go through filing my income taxes in TurboTax, I entered it into a field where I thought it would go....although this field says something about “fair market value”... TurboTax’s estimate of my return is around $1000-$1500 less than I was expecting it to be, I feel like this field is where I went wrong. So, do I enter the “imputed income” figure somewhere in TurboTax? Or no?

Help!

Jaime

Jlcalore
Level 2

Imputed income domestic partner

Me again... with regard to the “imputed income” and the “fair market value figure”,  and which one to plug in where in TurboTax,  as I was googling what fair market value is and how to find it,

I noticed that some articles say to take what your health coverage would cost for an individual and what it would cost for “individual plus one”, my employer (which was the state of Rhode Island) did not offer Individual plus Spouse, we had to choose between Individual plan, or Family Plan. We chose family plan which was $300 a month out of my paycheck but I also had the imputed income which was somewhere around $230 or $280 per biweekly paycheck as well (I think..)

 

JosephF8
Expert Alumni

Imputed income domestic partner

The W-2 Box 14 amount for Imputed Income.  Your employer has included this as informational  for Insurance premiums which you will enter under Deductions and Credits. This only helps if you are itemizing.. This way you can tell how much of your

Box 1 income comes from this.

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Jlcalore
Level 2

Imputed income domestic partner

Thank you so much for responding Joseph!
OK so, I don’t not record imputed income anywhere on my return.... or do I record it under the deductions and credits- (I’m just taking a standard deduction).

Now, what do I enter then on the page called “Subtractions from State Income” , that has all the little check boxes, and one of them says “health insurance coverage for a domestic partner”?

I currently have that box checked.

And what would I put in the “fair market value” box, or would I leave it blank?

JosephF8
Expert Alumni

Imputed income domestic partner

Which state are we talking about here?

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Jlcalore
Level 2

Imputed income domestic partner

RI

 

Jlcalore
Level 2

Imputed income domestic partner

Rhode Island...

DawnC
Expert Alumni

Imputed income domestic partner

On your Rhode Island state return, you can enter the amount of the imputed income (Box 14) under Subtractions - health insurance premiums for a domestic partner.  This will reduce your taxable income for Rhode Island.  Since you are not itemizing on your federal return, it won't make a difference there so you can skip it on the federal return.  

@Jlcalore 

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Jlcalore
Level 2

Imputed income domestic partner

Hi Dawn, thank you, ok, I am going to go do this with box 14!

@DawnC

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