Fringe Benefits Give a Double Tax Break

If you want to motivate or reward your employees, give them a tax-free benefit. The cost of certain benefits you offer your employees can be nontaxable to them and tax-deductible to your business. Some fringe benefits you might want to consider offering your employees:

• Pay your employees' health insurance premiums or reimburse them for medical expenses.
• Pay certain mass transit or parking costs. 
• Pay the premiums for up to $50,000 of group term life insurance coverage. Amounts paid for insurance in excess of $50,000 are taxable to your employees. 
• Allow employees to purchase your company's merchandise at a discount. As long as the discount rate doesn't exceed the gross profit percentage on the merchandise, the benefit is free of tax to the employee. 
• Give holiday gifts of nominal value. As long as the gifts are not in cash or gift certificates, your employee gets a tax-free gift and you get a tax deduction. 

Most of these benefits must be provided equally among all your employees. If you discriminate in favor of certain key or highly compensated employees, the benefits could be taxable to them. Certain of these benefits may NOT be paid to 2% or greater owners (or their spouses) of S-Corporations and Partnerships. Check with us first!

© Copyright 2000 Raymond S. Kulzick. All rights reserved. 001211.