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.