HomeImputed Income
Under current Internal Revenue provisions, the value of employer-paid medical coverage for anyone who is not the employee’s tax dependent is considered imputed income and is subject to FICA (Social Security and Medicare), federal income taxes, and any other required payroll tax. If the employee and his/her domestic partner are registered with the State of California and have submitted form UPAY 850 indicating they are registered and the filing date, they will not have imputed income for California income tax purposes. Any out-of-pocket premium cost for medical coverage of the partner (and/or the partner's child/grandchild) will be deducted from the employee’s pay on a pretax basis for California income tax purposes. For federal tax purposes, the employee will have imputed income and the out-of-pocket premium cost must be paid on an after-tax basis.
To estimate the employee’s imputed income and the estimated tax on that income, use the worksheet and chart below.