Whether you’re an owner of a small business or an employee of one, you should be well aware of the importance of benefits. If you’re a small business owner, providing benefits such as medical insurance can help attract talent and to retain the talent you already have. From an employees’ expensive, the perks of benefits are more obvious. But you might be wondering: which benefits are taxable, and which are not? That’s what we’d like to address today.
Defining Fringe Benefits
Before we dive into which benefits are taxable and which are not, let’s take a moment to familiarize ourselves with the term ‘fringe benefits.’
At their most basic level, fringe benefits are additions to an employee’s compensation beyond their regular salary. It follows that perks such as vacation time and dependent care are employee benefits, but we cannot truly classify them as fringe benefits.
When Can They Be Taxed?
You may have heard that one of the most appealing aspects of fringe benefits is that they cannot be taxed. This is an oversimplification. While this is typically true, let’s go over some taxable fringe benefits you should watch out for both as an employee and an employer.
If you regularly receive bonuses as part of your compensation, you’re probably already aware that they are taxable. If you’ve never received one before, this is something you should be aware of.
Cash prizes such as gift cards are occasionally given out in office settings. But did you know they are taxable? One exception to this would be if the employer controlled how you could redeem the gift card. Employers might want to consider giving out tangible, non-cash prizes as a way of getting around the taxation of this fringe benefit.
Does your employer let you make use of a company car? If so, you should be aware that you can be taxed if you make personal use of it. This means a real headache for employers and employees alike. Next time you make personal use of a company vehicle, keep in mind that this qualifies as a taxable fringe benefit.
Increasingly, companies are recognizing the importance of exercise and an active lifestyle to the health and productivity of their employees. As such, many employers offer a gym membership as a fringe benefit to their workers. This may or may not be taxable, depending on a number of factors. The location of the gym must be owned or leased by the employer. Additionally, the gym has to be primarily used by your employees and their families.
Partner with Malden Solutions Today
Malden Solutions has a wealth of expertise in providing employer insurance solutions, HR solutions, and individual insurance solutions to businesses, both big and small. Our team of seasoned professionals can help you navigate the rapidly-changing world of insurance with ease. We partner with businesses and individuals throughout the country to provide our dedicated services for employee benefits but also work within our surrounding communities in Maryland, Northern Virginia, and Washington, D.C. Contact us today to learn more about how we can provide effective, dynamic solutions for your business. Stay connected with us on Twitter, Facebook, and Linkedin.