Employee compensation in the form of salary, wages, bonuses, awards, fringe benefits, restricted property, stock options, and sickness and injury benefits are usually taxable. Allowance and reimbursements for transportation and moving, employer contributions to retirement plans, group term life insurance (to $50,000), educational assistance, accident and health insurance, and de minimis benefitsde minimis benefitsEmployer-provided products or services that are not taxable to employee; e.g., turkey for Thanksgiving Day. are generally not taxable.

Go to Publication 17 and read Chapter 5: Wages, Salaries, and Other Earnings.

The tax law provides that all fringe benefits must be included in the employee’s gross income, unless specifically excluded by law. Some additional fringe benefits not specifically discussed in Chapter 5, Publication 17, that may be excluded from gross income are described below.

Meals and lodging can be excluded if certain tests are met. Employees, their spouses, and dependents may exclude from income the value of meals and lodging provided by their employer. The exclusion is granted for any meals and lodging furnished by the employer for the convenience of the employer but only if:

To exclude the value of lodging provided by the employer, the employee must be required to accept the lodging to perform the duties of the job properly. For example, a taxpayer who receives lodging on an offshore oil rig may exclude the value of the lodging from income, since the employee cannot go home at night. The exclusion for lodging also includes the value of utilities, such as electricity, water, heat, gas, and similar items that make the lodging habitable. The value of meals or lodging provided by the employer in other situations and cash allowances for meals or lodging must be included in the employee’s gross income.

No-additional-cost services are excluded. These include services that are provided to employees and their families at little or no additional cost to the employer, and which would otherwise have remained unused. An airline employee who is allowed to fly at no cost on a “standby” basis is an example. The value of the air fare may be excluded from the employee’s gross income.

Employees are only allowed to receive “tax free” services in the major line-of-business in which they are employed. For example, if an airline company also owns a rental car agency, the employees working in the airline division would not be entitled to the tax free use of rental cars.

Qualified employee discounts are excluded. The value of employee discounts may be excluded from gross income if the discounts are available on a nondiscriminatory basis. That is, the discounts must be available to substantially all full-time employees. However, an employee discount is not tax free if the discount:

Working condition fringe benefits are excluded. An employee may exclude the value of property or services provided by an employer to the extent that the cost of the property or services would be a deductible expense of the employee. Examples of this type of exclusion include the use of a company car for business (not personal) purposes and a subscription to a tax journal paid for by a CPA firm. The working condition fringe benefit rules also allow several expenses that would not be deductible if paid by the employee. These include the value of parking provided to an employee and certain personal use of demonstrator autos by automobile salespeople.

Athletic facilities can be excluded. Employees may exclude from gross income the value of the use of an athletic facility located on the premises of their employer. The facility must be used primarily by employees.