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View Full Version : Imputed Income


rightseat
01-15-2019, 11:44 AM
I have never really understood imputed income related to flight benefits. I am certain I am not the only one. Can anyone explain how this works in layman financial terms?

My example: my benefits include me, my parents and I may soon be adding a significant other. Last year I also used about six or seven buddy passes.

I think my last 2018 pay stub showed about $700 in imputed income.

How can I figure out “about” how much it costs me each time I give out a buddy pass, or when either I or any of the individuals on my benefits (depending on who uses them if that makes a difference). I would really like to get down what the number is after taxes.

I am a second year FO that made about $140k last year. I rarely call in so I have a ton of swag points but I also do not want to be giving away buddy passes if it is going to be costing me a bunch of money. I just really have no idea how it alll works.


elmetal
01-15-2019, 11:55 AM
I have never really understood imputed income related to flight benefits. I am certain I am not the only one. Can anyone explain how this works in layman financial terms?

My example: my benefits include me, my parents and I may soon be adding a significant other. Last year I also used about six or seven buddy passes.

I think my last 2018 pay stub showed about $700 in imputed income.

How can I figure out “about” how much it costs me each time I give out a buddy pass, or when either I or any of the individuals on my benefits (depending on who uses them if that makes a difference). I would really like to get down what the number is after taxes.

I am a second year FO that made about $140k last year. I rarely call in so I have a ton of swag points but I also do not want to be giving away buddy passes if it is going to be costing me a bunch of money. I just really have no idea how it alll works.




Imputed income is a way the IRS collects taxes on a benefit that is given to someone who isn't you, or isn't your collective financially speaking (children and wife for example). What that means is the IRS wants taxes paid upon these benefits. For example: buddy passes, parents, etc.


The way imputed income is calculated varies from airline to airline, but I bet SWA has a table of the "value" of a specific route in monetary terms, and what translates to is, as far as the government is concerned, taxes owed. So you might see an "imputed income" of $100 for a flight, and then under deductions see a 100 dollar post tax deduction. What that essentially means is that you paid income tax on the $100 flight.


Now for actual numbers and such you have to consult your travel department or SWAPA. I know here at NK we have a table with approximate values for a leg and such.

Proximity
01-15-2019, 12:27 PM
I am a second year FO that made about $140k last year. I rarely call in so I have a ton of swag points but I also do not want to be giving away buddy passes if it is going to be costing me a bunch of money. I just really have no idea how it alll works.

I'm pretty sure when it comes to buddy passes, you pay inputed income on only the SWAG points, not the buddy passes. I've never subjected a 'friend' of mine to a "buddy pass", especially with the new restrictions.

Anyways, back to SWAG, in my mind the best thing to do with them is to convert them to gift cards. A $100 gift card costs 6667 points, valuing the points at 66.7cents per point. Last year I was charged a rate of 1.48 cents per SWAG point. So the cost to me in tax, per $100 gift card is as follows.

6667 * .0148 * marginal tax rate (24%) = $23.68

Or basically the value of the card times my marginal tax rate.

The only way to get out of paying inputed tax is to opt out of the SWAG program, but you're better off just taking the gift cards and paying the tax. It's worth about $54 per month assuming you don't call in sick.


full of luv
01-15-2019, 05:25 PM
Imputed income is a way the IRS collects taxes on a benefit that is given to someone who isn't you, or isn't your collective financially speaking (children and wife for example). What that means is the IRS wants taxes paid upon these benefits. For example: buddy passes, parents, etc.


The way imputed income is calculated varies from airline to airline, but I bet SWA has a table of the "value" of a specific route in monetary terms, and what translates to is, as far as the government is concerned, taxes owed. So you might see an "imputed income" of $100 for a flight, and then under deductions see a 100 dollar post tax deduction. What that essentially means is that you paid income tax on the $100 flight.


Now for actual numbers and such you have to consult your travel department or SWAPA. I know here at NK we have a table with approximate values for a leg and such.

Another source of imputed income at our employer can come from accepting the company provided life insurance above the amount that the iRS thinks is reasonable.... the value above that is added to our w2's as imputed income.

elmetal
01-15-2019, 05:27 PM
Another source of imputed income at our employer can come from accepting the company provided life insurance above the amount that the iRS thinks is reasonable.... the value above that is added to our w2's as imputed income.
yep..... filler

FlyingPirate
01-16-2019, 05:05 AM
I'm pretty sure when it comes to buddy passes, you pay inputed income on only the SWAG points, not the buddy passes. I've never subjected a 'friend' of mine to a "buddy pass", especially with the new restrictions.

Anyways, back to SWAG, in my mind the best thing to do with them is to convert them to gift cards. A $100 gift card costs 6667 points, valuing the points at 66.7cents per point. Last year I was charged a rate of 1.48 cents per SWAG point. So the cost to me in tax, per $100 gift card is as follows.

6667 * .0148 * marginal tax rate (24%) = $23.68

Or basically the value of the card times my marginal tax rate.

The only way to get out of paying inputed tax is to opt out of the SWAG program, but you're better off just taking the gift cards and paying the tax. It's worth about $54 per month assuming you don't call in sick.

So... You're paying $124 for a $100 gift card?
I actually do use my SWAG for buddy passes. 2,700ish points for a RT pass is pretty good. It cost me $40 to get my sister in Phoenix to and from NY. To each their own.

BLAHBLAHBLAH
01-16-2019, 05:57 AM
That’s not what he said at all.

Proximity
01-16-2019, 06:28 AM
So... You're paying $124 for a $100 gift card?
I actually do use my SWAG for buddy passes. 2,700ish points for a RT pass is pretty good. It cost me $40 to get my sister in Phoenix to and from NY. To each their own.

No, but I will say that many pilots are notoriously bad at math...;)

Bucky19
01-16-2019, 12:48 PM
I have never really understood imputed income related to flight benefits. I am certain I am not the only one. Can anyone explain how this works in layman financial terms?

My example: my benefits include me, my parents and I may soon be adding a significant other. Last year I also used about six or seven buddy passes.

I think my last 2018 pay stub showed about $700 in imputed income.

How can I figure out “about” how much it costs me each time I give out a buddy pass, or when either I or any of the individuals on my benefits (depending on who uses them if that makes a difference). I would really like to get down what the number is after taxes.

I am a second year FO that made about $140k last year. I rarely call in so I have a ton of swag points but I also do not want to be giving away buddy passes if it is going to be costing me a bunch of money. I just really have no idea how it alll works.

You receive imputed income on the SWAG points. (Not the buddy passes). Whatever you then buy with the points has no effect on the taxes.
If you received $700 for the year and your tax rate is 25% then it will add 700 x 25% or $175 to your federal tax bill. So you are paying (in this example) $175 for all the SWAG points you received for the year. That $175 is the cost of all your buddy passes, gift cards, etc for the year.

What you then do with the points has no further tax implications whether you buy buddy passes, gift cards, etc.

rightseat
01-16-2019, 01:00 PM
So is there no imputed income on the flights taken by my parents or significant other?

elmetal
01-16-2019, 01:10 PM
So is there no imputed income on the flights taken by my parents or significant other?
I'd be extremely surprised if there weren't because the IRS has definitely spoken out about that.

tanker
01-16-2019, 02:21 PM
The only imputed income at SWA is on the SWAG points not on any flights by you or family members

FlyingPirate
01-16-2019, 03:05 PM
Disregard my previous post. I admit my understanding was completely inaccurate. All good now.:cool:

BigWillyCapt
01-16-2019, 04:27 PM
I don't believe there is any imputed income from parents. However there might be. I also suspect there is imputed income from significant other benefits. At least there was at my previous airline.

Excargodog
01-16-2019, 07:25 PM
So is there no imputed income on the flights taken by my parents or significant other?

Yes there is. Their free travel is considered a fringe benefit to you. You will wind up taxed for what the IRS is told the value of it is at your marginal rate.

https://www.law.cornell.edu/cfr/text/26/1.61-21

symbian simian
01-16-2019, 08:18 PM
Yes there is. Their free travel is considered a fringe benefit to you. You will wind up taxed for what the IRS is told the value of it is at your marginal rate.

https://www.law.cornell.edu/cfr/text/26/1.61-21
Yes, and tax is taken the moment the swag points are paid in your account, so if you later but gift cards or buddy passes it is not taxed again.

tanker
01-17-2019, 01:00 AM
Yes there is. Their free travel is considered a fringe benefit to you. You will wind up taxed for what the IRS is told the value of it is at your marginal rate.

https://www.law.cornell.edu/cfr/text/26/1.61-21
Maybe at other airlines but not for SWA. At SWA there is no imputed income on personal, family, or companions passes. The only imputed income is on SWAG points which can be converted to buddy passes, Rapid Reward points, gift cards, or actual items.

navigatro
01-17-2019, 05:01 AM
Can't find my checkbook. Hope you don't mind I pay you in change.

sailingfun
01-17-2019, 05:13 AM
Maybe at other airlines but not for SWA. At SWA there is no imputed income on personal, family, or companions passes. The only imputed income is on SWAG points which can be converted to buddy passes, Rapid Reward points, gift cards, or actual items.

There is no imputed income at any airline for immediate family members or the employee using pass travel. This is contrary to normal IRS rules and is secured through a special exemption put in place many years ago by ALPA. This exemption often comes up as a item the IRS and some in Congress would like to see eliminated. It takes legislative capital to keep it intact. This is one of many reasons all pilots should contribute to whatever PAC your union has set up. If you don’t please don’t come on forums and complain when commuting suddenly gets very expensive with imputed income on all free travel.
In the case of buddy passes some airlines don’t pay imputed income because they charge what is known legally as a yield fare so the passes are not free. If they are free you owe imputed income regardless of what your employer lists when you file.

Bucky19
01-17-2019, 06:47 AM
So is there no imputed income on the flights taken by my parents or significant other?

That's correct. Imputed income is added for the SWAG points. There is no additional cost or fee for using a buddy pass. (Unless international then departure taxes etc. are charged but that is a separate matter).

KPer
01-17-2019, 12:56 PM
Gift cards or convert them to Rapids Rewards points. 4500 SWAG buys 5000 RR points.

tr4a
01-17-2019, 01:11 PM
The Company pays the taxes for passes for immediate family members. The other passes and taxed via the SWAG points as stated above. The cost (tax) is about $12-15 per pass.

Imputed income is also used for Loss of License insurance. If you opt in for the tax-free LOL, you pay the tax on the company paid benefit. This will make the LOL pay tax-free. It shows up as Imputed Income.

sailingfun
01-17-2019, 05:01 PM
The Company pays the taxes for passes for immediate family members. The other passes and taxed via the SWAG points as stated above. The cost (tax) is about $12-15 per pass.

Imputed income is also used for Loss of License insurance. If you opt in for the tax-free LOL, you pay the tax on the company paid benefit. This will make the LOL pay tax-free. It shows up as Imputed Income.

There are no taxes for immediate family members flying on passes currently. That exemption might go away in the future but there are no taxes for the company to pay.

sailingfun
01-17-2019, 05:02 PM
Yes there is. Their free travel is considered a fringe benefit to you. You will wind up taxed for what the IRS is told the value of it is at your marginal rate.

https://www.law.cornell.edu/cfr/text/26/1.61-21

There is a exemption for immediate family including parents.

Excargodog
01-17-2019, 05:30 PM
Maybe at other airlines but not for SWA. At SWA there is no imputed income on personal, family, or companions passes. The only imputed income is on SWAG points which can be converted to buddy passes, Rapid Reward points, gift cards, or actual items.

Which means you are paying imputed income on all of those things. The IRS gets their money, just the same, no matter what you barter the SWAG points for.

That’s the federal law. SWA just structures it different than others. The tax still gets paid and ultimately YOU pay it at your marginal rate.

sailingfun
01-18-2019, 02:32 AM
Which means you are paying imputed income on all of those things. The IRS gets their money, just the same, no matter what you barter the SWAG points for.

That’s the federal law. SWA just structures it different than others. The tax still gets paid and ultimately YOU pay it at your marginal rate.

One more time. There is no tax or imputed income for airline standby passes under the US tax code for immediate family members. This includes parents. There is a exemption.

tanker
01-18-2019, 02:40 AM
Excargodog
SWAG points are not used for non-rev travel for the employee, the employee’s spouse, the employee’s dependents, or the employee’s parents. In fact no SWA employee is required to participate in the SWAG program and they still get full flight benefits and there is no imputed income paid. Also retirees get flight benefits and they don’t pay any taxes on the flights. Again at SWA there are no taxes paid on flight benefits for active or retired employees and those family members eligible for flight benefits. The only taxes is on SWAG points which are not connected to flight benefits and there is no requirement to collect SWAG points.

rightseat
01-19-2019, 07:20 PM
Thanks all. This helps a bunch.

elmetal
01-30-2019, 07:13 PM
There is a exemption for immediate family including parents.

Can you source that?

sailingfun
01-31-2019, 05:07 AM
Can you source that?

Well not one airline in the country charges imputed income for immediate family members. What more proof do you need.

elmetal
01-31-2019, 05:08 AM
Well not one airline in the country charges imputed income for immediate family members. What more proof do you need.

For parents there is no IRS exception. That's the source I need. Because 3 airlines off the top of my head charge imputed income for parents. Never for kids or spouses of course.

sailingfun
01-31-2019, 05:12 AM
For parents there is no IRS exception. That's the source I need. Because 3 airlines off the top of my head charge imputed income for parents. Never for kids or spouses of course.
They can charge anything they want as imputed income. If they are the employees parents they are doing it wrong and when you file your taxes you need not claim that income.
I suspect however what you actually saw at those airlines was a policy to charge parents to pass ride. This has zero to do with imputed income or taxes.

Background information: Before the new pass travel policy took effect in March 2012, United retirees may not have paid a lot of imputed taxes because service charges on that travel offset the taxes. Now, many pass riders fly “service charge waived” system-wide, so imputed taxes add up fast.

The U.S. government deems pass travel by certain pass riders as a “taxable benefit"; which triggers "imputed taxes". They accrue whenever your taxable pass riders use personal passes or vacation passes.

By law, United must keep track of each employee/retiree's "Pass Tax Value". If your "taxable pass riders" fly using your passes during the year then United will send you an invoice each quarter for withholding taxes you must pay. In January you will receive a W-2 form that reflects the total Pass Tax value and how much you paid in withholding during the last fiscal year. The W-2 will be reported to the IRS; you must declare it on your taxes.
NOTE: Previously, retirees did not pay withholding taxes quarterly, we were sent a 1099 for the entire year. In January 2018 you may have received your final 1099 form (if your taxable pass riders accrued more than $600 of Pass Tax). Going forward, we will be invoiced quarterly (beginning in March 2018 for Pass Travel from 11/1/2017- 10/31/2018) and we will receive a W-2 form in January 2019. There is no $600 threshold with the new W-2 reporting method.


What gets taxed? Pass travel by the retiree's "taxable pass riders": domestic partner, enrolled friends and non-dependent children after age 18 or 23 (if attending school). Employees also pay tax on buddy travel.

What does NOT get taxed? Pass travel by "non-taxable pass riders": the retiree, spouse, parents and dependent children < 26 yrs old.

elmetal
01-31-2019, 05:14 AM
They can charge anything they want as imputed income. If they are the employees parents they are doing it wrong and when you file your taxes you need not claim that income.


Background information: Before the new pass travel policy took effect in March 2012, United retirees may not have paid a lot of imputed taxes because service charges on that travel offset the taxes. Now, many pass riders fly “service charge waived” system-wide, so imputed taxes add up fast.

The U.S. government deems pass travel by certain pass riders as a “taxable benefit"; which triggers "imputed taxes". They accrue whenever your taxable pass riders use personal passes or vacation passes.

By law, United must keep track of each employee/retiree's "Pass Tax Value". If your "taxable pass riders" fly using your passes during the year then United will send you an invoice each quarter for withholding taxes you must pay. In January you will receive a W-2 form that reflects the total Pass Tax value and how much you paid in withholding during the last fiscal year. The W-2 will be reported to the IRS; you must declare it on your taxes.
NOTE: Previously, retirees did not pay withholding taxes quarterly, we were sent a 1099 for the entire year. In January 2018 you may have received your final 1099 form (if your taxable pass riders accrued more than $600 of Pass Tax). Going forward, we will be invoiced quarterly (beginning in March 2018 for Pass Travel from 11/1/2017- 10/31/2018) and we will receive a W-2 form in January 2019. There is no $600 threshold with the new W-2 reporting method.


What gets taxed? Pass travel by the retiree's "taxable pass riders": domestic partner, enrolled friends and non-dependent children after age 18 or 23 (if attending school). Employees also pay tax on buddy travel.

What does NOT get taxed? Pass travel by "non-taxable pass riders": the retiree, spouse, parents and dependent children < 26 yrs old.

Again, before listening to someone on the internet about what I can and can't pay taxes on, I need a source by the IRS saying it is exempt from the fringe benefits for parents. You are giving good information, no doubt. But when the IRS comes knocking, I need the law, not a company manual

tomgoodman
01-31-2019, 06:36 AM
If the IRS taxes you for the buddy passes you give out, at least the recipients should get a tax deduction for the monetary loss, pain, and suffering caused by said buddy passes. :p

sMFer
01-31-2019, 11:59 AM
For parents there is no IRS exception. That's the source I need. Because 3 airlines off the top of my head charge imputed income for parents. Never for kids or spouses of course.Well, in past lives I've had non rev bennies for US, UA, DL, AA, F9 and now SW and have never had imputed income for my parents.

Sent from my Moto G (4) using Tapatalk

FL370esq
01-31-2019, 03:23 PM
If the IRS taxes you for the buddy passes you give out, at least the recipients should get a tax deduction for the monetary loss, pain, and suffering caused by said buddy passes. :p

Based on the price the "not-your-buddy" pass riders pay for the "privilege," the priority they are offered and the a$$ pain involved in trying to use them, pretty sure this borders on a violation of the Geneva Convention and, as such, would land you behind the glass wall in The Hague. 😁

badflaps
01-31-2019, 09:17 PM
Based on the price the "not-your-buddy" pass riders pay for the "privilege," the priority they are offered and the a$$ pain involved in trying to use them, pretty sure this borders on a violation of the Geneva Convention and, as such, would land you behind the glass wall in The Hague. 😁

I think I just totalled out my last Depends............