The IRS considers university-sponsored housing a taxable employee benefit. UCSF staff employees and faculty may be subject to imputed income tax when their monthly housing fee is below market rate. Students and trainees (postdocs, medical residents, and clinical fellows) are not subject to imputed income tax. A change of your university affiliation (like when a postdoc becomes faculty) may have tax consequences.
Residents may be subject to imputed income tax reporting, per the Tax Reform Act of 1986, under Internal Revenue Service, Title 26 U.S. Code § 119, regarding the tax treatment of housing furnished to faculty or other employees of an educational institution. In the event that the University reports imputed income, Housing Services will notify the Resident in advance.
Imputed income, according to the IRS, is the value of non-monetary compensation given to employees in the form of fringe benefits. According to the IRS, if you receive “benefits” as a result of being employed, such as being eligible for below market rate housing, then these benefits may be taxed. UCSF provides lower rents than comparable units in the off-campus housing market, so the IRS considers rent savings an employee benefit. University sponsored housing could be considered a taxable employee benefit, or imputed income. Imputed income is added to an employee’s gross wages so employment taxes can be withheld. It is not included in an employee’s net pay since the benefit was already given in a non-monetary form (rent savings).
In order for campus housing to be considered imputed income, the monthly rent has to meet certain criteria set by the Safe Harbor Amendment. The Safe Harbor valuation rule states that if the annual rent is equal to or greater than 5% of the “fair market value”, the value of such housing is not considered imputed income and is not included in the gross income of an employee.
Example (each Resident’s situation will vary):
$600,000 Appraised fair market value of the property if sold
X 5%
= $30,000 per year in rental income (Safe Harbor annual rental rate)
÷ 12 months per year
= $2,500 (Safe Harbor monthly rental rate)
If Resident pays $2,500 or higher in monthly rent, there is no imputed income tax.
However, if the total rent paid during the calendar year is less than the Safe Harbor rate, the difference must be included in the employee’s gross income for tax purposes.
Example:
$2,500 (Safe Harbor monthly rental rate)
- $2,300 (Resident’s actual monthly rent payment)
= $200 (monthly imputed income / IRS considers this a taxable employee benefit)
In other words, because you are paying less than the assessed market value of this property, you will be taxed on the difference between what you pay and what the rental value is. Generally, it is a better deal to pay a tax on the benefit than it is to pay the full rental market rate.
The imputed income amount will appear on your paystub as a separate line item added to your gross wages prior to tax deductions. You may want to consult a tax attorney or certified public accountant if you have a complicated tax situation, or if you need more clarity on the IRS tax code.
An independent real estate appraiser recently assessed the value of UCSF Housing properties. Using this assessment, Housing Services determined that due to Safe Harbor, your imputed income will be reported to UCSF Controller’s Office. The imputed income will appear on your tax forms (W-2). Per Housing’s fiduciary responsibility, we will need to provide the Controller’s Office with a list of our Housing Residents who are impacted with imputed income.
If your housing offer qualifies you for imputed income, you will be notified at the time of signing your Housing Agreement of the amount of imputed income.
If you have any questions, please reach out to HousingFinance@ucsf.edu.
