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Tax Tip
Overview
Fringe benefits are benefits over and above your salary provided by your employer. They include accident and health plans or group-term life insurance.
For example, if your company has a resort you can use free of charge, you must include the fair market value of the accommodations in your taxable income. Your employer usually figures the taxable amount. If the value is set at $1,000 for your 2-week stay, then $1,000 will be included in your taxable wages.
If you had to pay the $1,000 out of pocket, it would really cost you more because you'd be spending after-tax dollars. In the 25% bracket you must earn $1,333 to have $1,000 left after taxes.
The Tax Benefit
A fringe benefit that meets specified conditions may be fully or partially nontaxable if it meets IRS requirements even if your employer pays the entire amount. Even if the value of a fringe benefit is included in your taxable income, you still come out ahead.For example, if your company has a resort you can use free of charge, you must include the fair market value of the accommodations in your taxable income. Your employer usually figures the taxable amount. If the value is set at $1,000 for your 2-week stay, then $1,000 will be included in your taxable wages.
If you had to pay the $1,000 out of pocket, it would really cost you more because you'd be spending after-tax dollars. In the 25% bracket you must earn $1,333 to have $1,000 left after taxes.
Common Employee Benefits
- Health Savings Accounts & Cafeteria Plans
- Child Care Expenses
- Driving a Company-provided Car
- De Minimis Fringe Benefits
- Educational Assistance
- Employee Discounts for Property or Services
- Employee Stock Purchase Plans
- Free Parking
- Group-term Life Insurance
- Incentive Stock Options
- Interest-free or Bargain-rate Loans
- Meals & Lodging
- Medical & Dental Coverage
- No-cost Services
- Outplacement Services
- Employer-provided Retirement Plans
- Stock Bonuses or Bargain Purchases
- Transit Passes
- Working-condition Fringe Benefits
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Frequently Asked Questions
Question: Are health insurance premiums that are taken out of my paycheck as pre-tax dollars deductible?
Answer: No, they're not deductible, because you already received the tax benefit. In fact, having it taken out pre-tax may well be a greater benefit because of the adjusted gross income limitation on medical expenses on the return.
Question: I work for a company in Massachusetts and live in Connecticut. Can I claim my weekly hotel bill as expenses?
Answer: If the job qualifies as a temporary assignment, you can claim that expense as temporary living expense. You can get more specific information on your situation by stopping by your nearest H&R Block office.
More Employment FAQs
Answer: No, they're not deductible, because you already received the tax benefit. In fact, having it taken out pre-tax may well be a greater benefit because of the adjusted gross income limitation on medical expenses on the return.
Question: I work for a company in Massachusetts and live in Connecticut. Can I claim my weekly hotel bill as expenses?
Answer: If the job qualifies as a temporary assignment, you can claim that expense as temporary living expense. You can get more specific information on your situation by stopping by your nearest H&R Block office.
More Employment FAQs
Related IRS Forms & Publications
- Form 2106 - Employee Business Expenses
- Form 2106 Instructions
- Form 2106EZ - Unreimbursed Employee Business Expenses
- Publication 15-B - Employer's Tax Guide to Fringe Benefits
- Publication 463 - Travel, Entertainment, Gift and Car Expenses
- Publication 535 - Business Expenses
- Taxable Fringe Benefits Guide 2007
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