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Tax Free Fringe Benefits

wholesale merchandise - tax benefitsA fringe benefit is a form of pay for providing a service. For example using your company car for personal errands is a form of fringe benefit. Any fringe benefit is taxable unless it is specifically excluded by the law. Taxable fringe benefits must be included in wages and reported on the W-2. This article discusses some fringe benefits excluded by the law.


Health benefits

The cost of providing group health insurance is not taxable to the employee. This includes health, dental, and vision insurance. It does not matter if employees pay part or all the premium: The total amount paid is excludable from wages.


Long term care insurance

Premiums used to buy long term care insurance are not included in taxable income. However, the long term care benefits might be taxable depending on your personal circumstances.


Disability insurance

The cost of purchasing disability insurance is excludable from taxable income. On the other hand, disability benefits are taxable unless the benefits are for a loss of bodily function or limb.


Group term life insurance

Premiums paid for up to $50,000 of group term life insurance are not included in income.


Educational assistance

Up to $5,250 of educational expenses paid by the employer are tax free to the employee.


Dependent care assistance

You can exclude up to $5,000 of dependent care assistance from income. However, if the dependent care assistance is excluded from wages you cannot take advantage of the child and dependent care credit.
Transportation benefits.


Up to $130 per month can be excluded from wages for mass transit passes if your employees do not drive to work. Up to $250 per month can be excluded from wages for qualified parking. For employees who bike, $20 multiplied by the number of qualified bicycle commuting months can be excluded.


Working condition benefits

Working condition benefits are benefits provided by your employer so you can do your job. For example, you and your boss are fast approaching a project deadline, as a result your boss asks you to stay late to complete the project and provides dinner so you can focus on working on the project. The lunch provided by your boss in this condition is excluded from wages.


These are just a few of the fringe benefits that are excludable from wages. As you can see, some of the things you spend money on can be tax free with proper tax planning. By asking your employer to pay these benefits rather than paying wages, you can reduce the amount of tax you owe.


This article is presented to give basic information and not legal advice. You should consult with your own attorney or tax preparer to ensure that the above information is applicable to your situation.