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Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

I added my domestic partner to my health insurance earlier this year.  I understand that the Fair Market Value of my employer's contribution to the health plan is a taxable benefit to me.  I also understand that the bi-weekly contribution I have to make to the insurance plan is a post-tax deduction to me.  However, my employer is also deducting the FMV  from my net pay.  For example:

Gross Pay:  $1000

Non-Taxed Deductions:  $100

Value of Employer Paid Insurance on DP: $175.00

New Taxable Income: $1075

Taxes: $232

After Tax DP Insurance Premium: $75.00

After Tax Taxable Benefits - $175.00

Net Pay: $593.00

I can't seem to get a straight answer from my HR or payroll department.  But something seems off to me and I can't seem to quite understand what's happening.

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7 Replies

Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

Cash wages $1000

Pre-tax deductions -$100

Tax withholding -$232

After-tax deduction -$75

Total cash to you = $593

The additional $175 of imputed income is not actually money that you receive.  It is reported to the IRS as taxable income because it is a benefit that is not eligible for a tax deduction.  But it doesn't change your cash wages.

Another way to look at it is:

Value of your compensation (cash wages plus benefits) $1175

Pre-tax deduction for partner insurance (company share) -$175

Other pre-tax deductions -$100

Withholding -$232

After-tax deduction for partner insurance (your share) -$75

Net cash in your pocket = $593


Note that the imputed value of insurance will go away if you get married.


The same calculation would apply if you received certain other taxable benefits from the employer, such as personal use of a company car.  If the company allows you to use a business car for personal use, the value of the personal use is added to your taxable income on your W-2 even though it is not part of your take home pocket money wages.

Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

I'm still not clear.  My employer is taxing me on the value of the health insurance, since my taxes increased when this change was implemented.  I think it's roughly $80-$90 extra in taxes.  However, under the "deduction" part of my paycheck, they deduct my taxes, post-tax deductions for the insurance premium plus some other things and as a separate line they also deduct the same $175.00 that they increased my taxes by.  I'm having a hard time understanding this concept.  The numbers I put up are made up, but my take home pay is roughly $400 less per pay period and the only difference is the value of the insurance which is over $300 per pay period.

Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

It's hard to know without seeing your pay stubs before and after (and don't post them, this is a public forum).

The issue may be how to get the withholding calculated correctly.

For example:

Gross pay $1000
Value of insurance (added to calculate correct withholding) +$175
Pre-tax deductions -$100
Equals taxable income for *for withholding purposes* of $1075.
Subtract withholding -$232
Subtract value of insurance (since it's not really part of your pay) -$175
Subtract after-tax deductions -$75
Net take home pay = $593

Is $300 the cost of your share?  If so, then reducing your pay $400 would be $300 for the after-tax premium (your share) and $100 of taxes on their share.

If $300 is the value of their share of the premium, then your pay should only go down about $90 plus the cost of your share.  It's really hard to know without seeing your before and after pay reports.  You may need to keep climbing the ladder at HR, or maybe there is a friendly labor attorney who could review it quickly over coffee.

As a last resort you could file a complaint with your state labor relations board and let them investigate.

Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

The $300 is the bi-weekly value of their share of the premium based on the benefits confirmation statement I received during open enrollment.  This appears as a separate item on my pay stub.  My post tax- contribution is in a different section, which is what led me down this rabbit hole.  Thank you for your guidance.  I'll keep trying to go up the ladder.

Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

If you see the $300 added before tax computation and then subtracted later, that's an adjustment to calculate the correct tax withholding. If they are subtracting the adjustment but have forgotten to add the adjustment first, that seems like a mistake.  Good luck.
saber1075
New Member

Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

Did you ever get this straightened out? I'm going thru same issue.
carlosjfc
New Member

Can imputed income be taxed and also be deducted from your paycheck as a post-tax deduction?

Hello Mr Opus, I have exactly the same situation here and I will like to post my paystub here and see if you could help me to make sense of those numbers because honestly they don't add up for me. How is this that the Dependent Imputed Income is on Deductions and on Gross Earnings, Then is not clear to me how to separate from those deductions the Pre-Tax deductions and the Post-Tax deductions, It's not way that I can understand that paycheck. Please could you help me to make sense out of it? Thank you very much.paycheck.png

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