Changes to Fringe Benefits

Andrew Luce, CPA •

The IRS recently updated one of their publications which provides details for tax rules associated with employer provided fringe benefits (Publication 15-B). Some of you may ask, what are fringe benefits and why should I take the time to understand them?  

Firstly, fringe benefits are an extra benefit, provided by an employer to an employee, which supplements an employee’s salary, for example, a company car, paid parking, subsidized meals, health insurance, etc. which the employer may deduct and are also not taxable to the employee (a win-win situation). Secondly, through the 2017 Tax Cut and Jobs Act there were changes to the types of fringe benefits that an employer can write-off as a tax deduction. As a result, since some of these benefits will no longer be tax deductible by your employer, you may see some benefits eliminated at the workplace. Here are a few highlights that both employers and employees should be familiar with:

• Qualified parking is no longer deductible – qualified parking is parking employers provide employees on or near your business premises. It includes parking on or near the location from which your employees commute to work using mass transit, commuter highway vehicles, or carpools. It doesn’t include parking at or near your employee’s home.
• Commuter highway vehicle is no longer tax deductible – a commuter highway vehicle is any highway vehicle that seats at least 6 adults (not including the driver).
• Transit passes are no longer tax deductible – a transit pass is any pass, token, fare card, voucher or similar item entitling a person to ride, free of charge or at a reduced rate on one of the following:
  • On mass transit
  • In a vehicle that seats at least 6 adults (not including the driver) if a person in the business of transporting persons for pay or hire operates it.

Although these types of benefits are non-deductible, the IRS still considers these types of expenses to be non-taxable fringe benefits for the employees.
 
It is important to stay up-to-date with these tax law changes and plan for these changes so you are not caught off-guard at year end. Please contact me should you have any questions.