Taxation of Health & Welfare Benefits
The information provided below is not a substitute for professional/government tax counseling or for reading Internal Revenue Service (IRS) and California Tax Board (FTB) publications. Please consult with a qualified individual for more detailed information concerning applicable tax policies and regulations. The university does not provide specific tax advice to individuals.
What is imputed income tax for health & welfare benefits?
"Imputed income" is the term the IRS applies to the value of any benefit or service that should be considered income for the purpose of calculating federal taxes. In some cases, the UC departmental contributions paid toward the UC Postdoctoral Scholars benefit premiums (health, dental, vision, life, disability, accidental death and dismemberment insurances) on your behalf are considered taxable income or, imputed income, per US Internal Revenue Service (IRS) regulations.
The University's withholding and reporting responsibilities regarding health benefits furnished to a fellowship recipient varies depending on whether the recipient is a U.S. citizen (including a resident alien) or a non-resident alien and are based on IRS regulations.
Who is subject to imputed income tax for health & welfare benefits?
Postdoctoral Scholars may review their appointment letter or contact the hiring department to determine title code. The UC contribution paid towards health benefits will be taxed according to the following guidelines as required by the IRS:
Postdoc Fellows (title code 3253) and Paid Directs (title code 3254)
Benefits are taxable on the Employer paid portion of premiums for the Postdoc and covered dependents, as long as there is no concurrent Postdoc Employee (TC 3252) appointment over 50%.
US Citizens and other "Residents for US Tax Purposes"
Postdoctoral Fellows (3253) and Paid Directs (3254) are required to self-report the total annual value of their fellowships, including benefits for themselves and their dependents, when they prepare their U.S. and California income tax returns. Foreign visitors may be considered "residents" for tax purposes in some circumstances. Please consult with the IRS or FTB for details.
Non-Resident Alien Fellows (3253) and Paid Directs (3254)
Non-Resident Aliens are subject to withholding of 14% (F, M, Q, and J Visa holders) and 30% for all others. Taxes will be withheld from stipends and reported on forms 1042-S and a 592-B.
- Non-Resident Aliens who are Postdoc Paid Directs (3254) will be billed for their taxes and reported on forms 1042-S and 592-B, since their stipends are not paid by the University. Review billing statements for payment due dates and further details. Please note that any imputed income billed for can potentially be refunded by the IRS upon filing an annual tax return if tax status changes occur.
- International Postdoctoral Scholars who invoke tax treaties will not be subject to imputed income for federal tax purposes. However, the benefits will be reported on form 1042-S and on form 592-B for California tax purposes.
Postdoc Employees (title code 3252) with a 50% or greater appointment
Benefits are not taxable unless the Postdoc Employee has a Domestic Partner (DP), if so just the UC contribution that pays for benefits for the Domestic Partner and/or dependents will be taxed. Postdoc Employees who do not have a Domestic Partner (and/or dependents of a Domestic Partner) are not subject to imputed income tax.
UCSB uses GLACIER, a secured web-based system, to determine tax residency, withholding rates and income treaty eligibility. International Postdoctoral Scholars should update their GLACIER information annually or as changes occur in their foreign status. For more information about Glacier, visit: https://www.bfs.ucsb.edu/accounts-payable/non-resident-alien-information.