A fringe benefit is a form of pay for the performance of services. For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. Although generally voluntary, some of the most important “fringe” benefits have actually come to be expected from employees. These major types of fringe benefits include health insurance, retirement plans and paid time off. Information regarding these benefits is covered in the Health Insurance, Retirement Plans and Leave and Time Off sections. Fringe benefits covered in this section include:
For more on these topics, please click on the appropriate link at left.
Are Fringe Benefits Taxable?
Any fringe benefit you provide is taxable and must be included in the recipient's pay, unless the law specifically excludes it. The Fringe Benefits Guide of the Internal Revenue Code sets forth a number of tax exclusions identified by the IRS as applied to fringe benefits. These rules exclude all or part of the value of certain benefits from the recipient's pay.
For example, an employee’s gross income does not include the following types of qualified fringe benefits:
- Accident and health benefits.
- Adoption assistance.
- De minimis (minimal) benefits.
- Dependent care assistance.
- Educational assistance.
- Group-term life insurance coverage.
- Health savings accounts (HSAs).
- Moving expense reimbursements.
- No-additional-cost services.
- Retirement planning services.
- Transportation (commuting) benefits.
- Tuition reduction.
For more information, see IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits.