Tax treatment of fringe benefits
The Internal Revenue Code, IRS regulations and other IRS pronouncements spell out the treatment of various types of fringe benefits under the three types of employment taxes-FICA, FUTA, and income tax withholding. The chart below is designed to provide a quick reference to the employment tax treatment of various fringe benefits. In noting that a particular benefit is exempt from the employment taxes, it is assumed that the employer has complied with any special rules concerning such matters as nondiscrimination and recordkeeping.
Fringe Benefits
Treatment under different employment taxes
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|
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Income tax withholding
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Social Security
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Federal unemployment
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|---|
Airplanes, business use
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Exempt
|
Exempt
|
Exempt
|
Athletic facilities
|
Exempt
|
Exempt
|
Exempt
|
Airplanes, personal use
|
Taxable
|
Taxable
|
Taxable
|
Awards and prizes
|
Generally taxable
|
Generally taxable
|
Generally taxable
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Business expenses reimbursed
|
Exempt
|
Exempt
|
Exempt
|
Cafeteria plans
|
Generally exempt
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Generally exempt
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Generally exempt
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Cars, business use
|
Exempt
|
Exempt
|
Exempt
|
Cars, personal use
|
Taxable
|
Taxable
|
Taxable
|
Computer vehicles, in excess of aggregate value limits
|
Taxable
|
Taxable
|
Taxable
|
Computers, business use
|
Exempt
|
Exempt
|
Exempt
|
Computers, personal use
|
Taxable
|
Taxable
|
Taxable
|
Conventions, business purpose
|
Exempt
|
Exempt
|
Exempt
|
De minimis benefits
|
Exempt
|
Exempt
|
Exempt
|
Dependent care (limited to $5000, $2,500 if married filing separately)
|
Exempt
|
Exempt
|
Exempt
|
Discounts
|
Exempt
|
Exempt
|
Exempt
|
Education, business related
|
Exempt
|
Exempt
|
Exempt
|
Educational assistance program (limited to $5,250)
|
Exempt
|
Exempt
|
Exempt
|
Employee achievement awards
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Exempt to extent it is reasonable to believe the amounts will be excludable from gross income under Code Sec. 74 (c).
|
Health and accident insurance
|
Exempt
|
Exempt
|
Exempt
|
Home offices
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Exempt if reimbursed home office expenses qualify as a working condition fringe benefit.
|
Legal service, group plans
|
Taxable
|
Taxable
|
Taxable
|
Life insurance premiums, first $50,000 in coverage
|
Exempt
|
Exempt
|
Exempt
|
Life insurance premiums, over $50,000 in coverage
|
Taxable
|
Taxable
|
Taxable
|
Loans with below market interest rates
|
Exempt (deemed payment must be shown on Form W-2)
|
Exempt (unless loans are compensation related)
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Exempt (unless loans are compensated related)
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Maternity/paternity benefits, after six months
|
Taxable
|
Exempt
|
Exempt
|
Meals and /or lodging on employer's premises and for employer's convenience
|
Exempt
|
Exempt
|
Exempt
|
Moving expense, qualified
|
Exempt
|
Exempt
|
Exempt
|
Moving expenses, nonqualified
|
Taxable
|
Taxable
|
Taxable
|
No-additional-cost service
|
Exempt
|
Exempt
|
Exempt
|
Parking facilities
|
Exempt
|
Exempt
|
Exempt
|
Product testing
|
Exempt
|
Exempt
|
Exempt
|
Security
|
Exempt
|
Exempt
|
Exempt
|
Supplemental unemployment compensation plan benefits
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Taxable
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Exempt if linked to state plan and in lump-sum
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Exempt if linked to state plan and in lunp-sum
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Travel, business purpose
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Exempt
|
Exempt
|
Exempt
|
Tuition reduction
|
Exempt
|
Exempt
|
Exempt
|
Uniforms
|
Exempt
|
Exempt
|
Exempt
|
Vacation Pay
|
Taxable
|
Taxable
|
Taxable
|
Worker's compensation (occupational injuries)
|
Exempt
|
Exempt
|
Exempt
|
Working condition benefits
|
Exempt
|
Exempt
|
Exempt
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Reprinted with permission. © CCH<p>The Internal Revenue Code, IRS regulations and other IRS pronouncements spell out the treatment of various types of fringe benefits under the three types of emp</p>
Tax treatment of fringe benefits
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