As small and growing businesses evaluate employee compensation "packages, benefits are inevitably part of the discussion. Employee benefits are a way to supplement the wages of employees and can often be offered free of tax. benefits tax free help small businesses offer richer pay and employees appreciate the benefits in the workplace such as health benefits, meals on site, as well as reimbursement of tuition fees.
Wondering what benefits may be offered tax free? Here quick guide.
Benefits Definition
According to Investopedia , the definition a benefit in kind is "a collection of various benefits offered by an employer who is exempt from tax as long as certain conditions are met."
Common fringe benefits include health insurance, life insurance, reimbursement of tuition reimbursement for child care, cafeteria plan, employee discounts, the personal use of a vehicle of the investee, cell phones and meals provided at the workplace.
What benefits are tax-free?
In the publication 15-B, the IRS lists the types of benefits that can be offered free of tax. Here is a summary of benefits and their tax treatment.
| Type of benefit Fringe | tax Withholding income | social security and Medicare | Federal unemployment (FUTA) |
| accident and health benefits | Exempt, except for long-term care benefits offered by a flexible spending or similar arrangement. | Exempt, except for certain payments to employees S corporation are 2% of shareholders. | exempt |
| Achievement Awards | Exempt up to 10 $ price for qualified plans ($ 400 for ineligible price). | ||
| Support Adoption | Exempt | taxable | taxable |
| sports facilities | Exempt if virtually any use during the calendar year by employees, their spouses and dependent children, and the facility is operated by the employer in owned or leased by the employer premises. | ||
| De minimis (minimum) benefits | Exempt | ||
| the dependent care assistance | Exempt up to certain limits, $ 5,000 ($ 2,500 for married employees filing separate return). | ||
| education aid | Exempt up to $ 5.250 for benefits each year. | ||
| employee discount | exempt up to certain limits. | ||
| Stock Options Employee stock | Varies. Refer to IRS Publication 15-B for a discussion of stock options. | ||
| cell phones provided by Employer | Exempt if provided primarily for non-compensatory business purposes. | ||
| life insurance coverage term Group | Exempt | Exempt up cost of $ 50,000 of coverage. (Special rules applicable to former employees.) | Exempt |
| health savings accounts (HSA) | Exempt for qualified individuals to the limit of HSA contributions. | ||
| Accommodation on your business premises | Exempt if furnished for your convenience as a condition of employment. | ||
| Meals | Exempt if furnished on your business premises for your convenience. | ||
| Moving expense reimbursements | Exempt if the expenses would be deductible if the employee had paid. | ||
| services Non-plus-cost | Exempt | ||
| retirement planning services | exempt | ||
| transportation (commuting) benefits | Exempt up to certain limits, whether for walks in a road commuter vehicle and / or pass transit ($ 130), qualified parking ($ 250) , or qualified bicycle refund path ($ 20). | ||
| reduction of tuition fees | Exempt if for undergraduate education (or higher education if the employee carries out teaching or research activities). | ||
| Working Condition benefits | Exempt | ||
Chart Source - IRS Publication 15-B
Conclusion
small and growing businesses can use benefits such as health insurance, benefits, workplace, excellence awards and retirement benefits to offer tax-free compensation and create a benefits package to recruit and retain the best employees.
What questions do you have about benefits tax free or how to use them?
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