Which fringe benefits are nontaxable to an employee?

Author: Alice Gilman

Some fringe benefits are completely tax-free to an employee. Other fringe benefits are tax-free, up to monetary limits. Still other fringe benefits are subject to nondiscrimination rules, which results in the benefit being tax-free to a rank-and-file employee, but taxable to a highly compensated employee.

The following benefits are completely tax-free to all employees:

  • Health insurance;
  • Working condition fringe benefits;
  • De minimis fringe benefits;
  • Business use of a company car;
  • Qualified moving expenses;
  • Job-related educational assistance;
  • Employer-provided meals and lodging;
  • Length-of-service awards;
  • Athletic facilities;
  • Safety achievement awards;
  • Outplacement assistance; and
  • Identity theft prevention services.

The following fringe benefits are tax-free, up to certain monetary limits:

  • Qualified transportation fringe benefits;
  • Nonjob-related educational assistance - up to $5,250 a year;
  • Dependent care assistance - up to $5,000 a year; and
  • Group-term life insurance - the cost of up to $50,000 a year.

The following fringe benefits are tax-free to a rank-and-file employee, but taxable to a highly compensated employee if the fringe benefits plan is discriminatory:

  • No-additional-cost services;
  • Qualified employee discounts;
  • Dependent care assistance;
  • Adoption assistance; and
  • Tuition reduction.