Imputed Income
 

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.

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.

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

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.

That’s not what he said at all.

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

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.

So is there no imputed income on the flights taken by my parents or significant other?