Thomas R. Soule, CPA
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FREQUENTLY ASKED QUESTIONS
6 Tax Free Benefits For Employees
1.Frequent Flyer Miles

Employees who fly often on business can earn miles tax-free when they pay with a personal credit card for reimbursed corporate travel. When used as a rebate, the IRS permits employees to exclude frequent flyer benefits from taxable compensation. IRS Announcement 2002-18 specifically states: "This relief does not apply to travel or other promotional benefits that are converted to cash, to compensation that is paid in the form of travel or other promotional benefits, or in other circumstances where these benefits are used for tax-avoidance purposes."

2.Cell Phones

Under IRS guidance issued in September 2011, tax-free treatment is applicable to cases where employers provide cellphones to employees or where employers reimburse their employees for the business use of their personal cell phones without burdensome recordkeeping requirements. However, the guidance does not apply cellphone use that is not primarily business-related, as such arrangements are generally taxable.

3.Meals and lodging on Employer Premises

Meals are excludable from employee wages if they are provided on an employer's business premises and for the employer's convenience. Lodging also can be tax-free for employees if it is provided at the worksite, for the employer's convenience, and is a condition of employment.

4.Commuter Benefits and Free Parking

For the Year 2015, employees can contribute $130 a month tax-free for public transportation, $250 per month for qualified parking, or $380 per month for both public transportation and qualified parking.

5. Dependent care assistance

Generally, an employee can exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. However, the exclusion cannot be more than the smaller of the earned income of either the employee or the employee's spouse.

6. Qualified educational assistance

When an employer pays for tuition or educational expenses for an employee under an educational assistance plan, the costs are excludable from employee wages, if certain IRS requirements are met. Education may be at undergraduate or graduate level and is not required to be job-related. However, an employer must have a written plan, which does not offer alternative benefits to education. The employee cannot receive more than $5,250 per calendar year from their employer. The plan also cannot discriminate in favor of highly compensated employees.