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Information provided on this site is for general guidance only and
is often simplified. Actual IRS procedures are complex, and taxpayers
should obtain professional assistance or use IRS sources for complete
information.
IntroductionThe US Tax Code excludes nine types
of fringe benefit expense from taxable
income.
Business
TravelExpenses
that are "lavish or extravagant",
says the IRS, are not tax deductible.
HousingMost
types of job-related housing cost are deductible.
PensionsTax-privileged retirement plans: ERISA,
ESOPS, IRAs etc.
Company
CarsPersonal
use of a company car is usually a taxable
non-cash fringe benefit.
Medical
ExpensesBenefits received from health-care plans are generally taxable; the current regime will no doubt be substantially changed by President Obama's health-care law, when finally passed.
NOTE:
The tax regime applying to all fringe benefits is
highly complex, and professional advice should be
taken before planning any scheme designed to minimise
taxation. These notes are intended simply to give
a general overview and should not be relied upon as
a basis for action in any particular case.
Company
Cars
If an
employer provides a car (or other highway motor vehicle)
to an employee, his or her personal use of the car
is usually a taxable non-cash fringe benefit. The
employer must determine the actual value of this fringe
benefit to include in the employee's income.
Certain
employer-provided transportation can be excluded from
gross income. If the employer provides a qualified
transportation fringe benefit, it can be excluded
from the employee's income, up to certain limits.
A qualified transportation fringe benefit is:
Transportation
in a commuter highway vehicle (such as a van) between
the home and work place;
A
transit pass, or
Qualified
parking.
Cash
reimbursement by an employer for these expenses under
a bona fide reimbursement arrangement is also excludable.
However, cash reimbursement for a transit pass is
excludable only if a voucher or similar item that
can be exchanged only for a transit pass is not readily
available for direct distribution to the employee.
The exclusion
for combined commuter highway vehicle transportation
and transit pass fringe benefits cannot be more than
a total of $120 (2009) a month, regardless of the
total value of both benefits. The exclusion for the
qualified parking fringe benefit cannot be more than
$230 (2009) a month, regardless of its value. If the
benefits have a value that is more than these limits,
the excess must be included in the employee's income.
Commuter
highway vehicle - this is a highway vehicle that
seats at least six adults (not including the driver).
At least 80% of the vehicle's mileage must reasonably
be expected to be:
For
transporting employees between their homes and work
place, and
On
trips during which employees occupy at least half
of the vehicle's adult seating capacity (not including
the driver).
Transit
pass - this is any pass, token, farecard, voucher,
or similar item entitling a person to ride mass transit
(whether public or private) free or at a reduced rate
or to ride in a commuter highway vehicle operated
by a person in the business of transporting persons
for compensation.
Qualified
parking - this is parking provided to an employee
at or near the employer's place of business. It also
includes parking provided on or near a location from
which the employee commutes to work in a commuter
highway vehicle or carpool. It does not include parking
at or near the employee's home.
HousingMost
types of job-related housing cost are deductible.
PensionsTax-privileged retirement plans: ERISA,
ESOPS, IRAs etc.
Company
CarsPersonal
use of a company car is usually a taxable
non-cash fringe benefit.
Medical
ExpensesBenefits received from health-care plans are generally taxable; the current regime will no doubt be substantially changed by President Obama's health-care law, when finally passed.
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