Most income received from your employer generally ends up on a W-2 tax form at year’s end. However, some income is employee tax-free income. Here are eight common employee benefits that often avoid the impact of federal taxes. There are many more benefits to consider. Your tax professional can speak to this at your annual tax meeting.
1. Small gifts – non-cash
The IRS calls these “de minimis” benefits. Small-valued benefits are not included in income and could consist of the use of the company copy machine, occasional meals, small gifts, and tickets to a sporting event.
2. Group Term Life Insurance
You can generally exclude the cost of the premiums related up to the first $50,000 of group-term life insurance benefits.
3. Credit Card Airline “miles”
Credit card benefits like miles are not generally deemed as taxable income. So those miles earned on corporate credit cards that go to you as an individual are not likely to increase your tax bill.
4. Health Benefits
While now reported on W-2’s, employer-provided health insurance premiums are currently not required to be reported as additional income by the employee. This includes premiums paid for by the employee and qualified family members. In addition, the employee portion of premiums can be paid in “pre-tax” dollars.
5. Employee tuition reimbursement
Up to $5,250 of tuition reimbursed by your employer is not deemed to be additional taxable income.
6. Commuting expenses
You can generally exclude the value of transportation benefits you receive up to the following limits.
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- $270 per month for combined commuter highway vehicle transportation and transit passes.
- $270 per month for qualified parking.
- $20 multiplied by the number of months for qualified bicycle commuting expense reimbursement for a calendar year.
7. Company Health Savings Account (HSA) Contributions
Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax.
8. Retirement
Employer contributions to your retirement plan (401k, 403b, 457, simple IRA, etc.) are tax-free benefits.
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