Top 10 Tax-Free Employee Benefits
Offering More Benefits to Employees Without the Tax Liability
With tax season right around the corner, all employees are thinking about how much Uncle Sam is deducting from every paycheck. For most, it’s between 20 to as much as 50 percent of gross earnings. While smart employees take advantage of pre-tax savings plans, retirement savings, and other ways to stretch their dollars — there is a host of other tax-free benefits that they may not be aware of (or their employer doesn’t currently offer them).
Every company is looking for ways to boost their employee benefits package without going overboard on costs. Many are hoping to find ways to save money too. In order to provide the maximum value in a total compensation strategy, here is a list of the top 10 tax-free benefits you want to add to your package.
1. Company Vehicles
If your company offers a fleet for use by employees, you can deduct the mileage on annual tax reports. Employees pay nothing for this benefit and it’s completely tax-free for them. The only real issue comes when considering the high tax paid for gasoline to power the vehicle, which can be offset by using a fuel discount program.
2. Company Provided Equipment
Another benefit that’s tax-free for employees is company provided equipment, such as electronics, mobile devices, and other technology perks. Many employees enjoy being able to use the latest in software and hardware, particularly those who work offsite. Not only is this a tax-free benefit, but it can be claimed on corporate taxes as depreciated value over 1-4 years from date of purchase.
3. Frequent Flyer Miles and Travel Points
For employees who must travel for business purposes, there are a number of tax-free benefits that they can enjoy. Frequent flyer mile programs can be participated in, giving the company and employees free airline miles for future trips and discounts. Hotel chains offer rewards programs that let employees rack up points for gift cards and free hotel stays.
4. Communication Bills
If employees are required to furnish their own cell phone, internet service or other communication solution as part of their job, the company can reimburse them on a monthly basis completely tax-free. However, these items must be used exclusively for the business and not for personal use, otherwise the employee cannot claim them on their home office use tax return.
5. Meals and Lodging
Under IRS rules, when employers provide lodging and meals as part of the terms of employment or for employee events, this is a tax-free employee benefit. Many employers are offering free meals as part of their wellness program, and this is also tax-free.
6. Commuter and Parking Costs
Many employees must commute to work each day from long distances, therefore the IRS allows a pre-tax deduction of up to $125 a month for public transportation, twice that for parking, and a combined tax-free benefit for both needs. Companies that provide free parking and transportation for employees do not have to pay tax for this benefit.
7. Dependent Care Support
When employees are forced to care for dependents or aging family members, a portion of their dependent care benefits is tax-free each year. This is generally around $5,000 per year of a dependent care assistance plan.
8. Corporate Wellness Programs
The leading companies understand the importance of maintaining a healthy workforce, therefore corporate wellness programs are a popular choice. This is not only a tax-free benefit, but it can reduce health insurance premiums over time.
9. Non-cash Rewards and Swagger
Companies that want to maximize their incentive programs, but remain tax-free, can give out non-cash gift cards and corporate branded prizes to employees. Examples are gift certificates for local restaurants and sporting events, t-shirts, hats, and coozies. Employees love them and they don’t cost the company much to attain.
10. Corporate Learning and Development
A well-educated and trained workforce is a strong and productive one. Therefore, one of the best tax-free benefits a company can offer is a learning and development program for employees to enhance their skills. Tuition reimbursement is also tax-free up to a certain amount each year.