New Year – New Tax Considerations
Employees Can Benefit from the Tax Cuts and Jobs Act
Jackie Himes, CPA
Focused on You. Dedicated to Your Success.
January 8, 2018

The Tax Cuts and Jobs Act makes it more attractive for some businesses to offer employees fringe benefits. With the economy approaching full employment and nearly 80% of Americans not engaged in their jobs ( Gallup: 2017 State of the American Workplace ), adding fringe benefits could help you to attract and retain employees.

Some tax-free benefits that employees will value include:

  1. Employee Stock Options – Incentive stock options, stock purchase plans and non-statutory (nonqualified) stock options are not taxed when the employee exercises or sells the stock.
  2. Retirement Planning Services – Businesses that offer employees a pension or qualified retirement plan can also offer them retirement planning services and advice. However, under the Tax Cuts and Jobs Act, businesses may have to pay taxes on other services offered to employees like legal, tax planning and brokerage services. 
  3. Health, Accident and Long-term Care Insurance – Businesses can make tax-free contributions towards the cost of health, accident, and qualified long-term care insurance for employees. In addition, payments or reimbursements for employee medical expenses are tax-exempt.
  4. Group Term Life Insurance – Premiums paid for term life insurance with a death benefit up to $50,000 are tax-exempt.
  5. High Deductible Health Plans and Health Savings Accounts (HSA) – Businesses can enroll employees in a high deductible health plan with a health savings account ($3,500 limit for single employees and $6,775 for families) to pay for health care related expenses with pre-tax dollars. C corporations can also offer employees a health reimbursement account (HRA). There is not a dollar limitation on contributions made to HRAs and unused money rolls over to the next tax year. The contributions are considered an employer expense for tax purposes. 
  6. Educational Assistance – Businesses can contribute up to $5,250 per year towards tuition, textbooks, equipment and fees to further an employee’s education and to enrich their professional and personal growth.
  7. Dependent Care Assistance – Employees can exclude up to $5,000 from taxable income for dependent care expenses, including qualified day care and day camp programs.
  8. Health and Welfare Benefits – Businesses can offer employees, their spouses and dependents under the age of 25, a free membership to a gym or fitness facility on a company-owned property. 
  9. Car Expenses – Businesses can either provide employees with a company car or allowance for using personal vehicles on company business. Maintenance on the car, gasoline and repairs can be included as a deductible expense. 
  10. Commuting Expenses – A transportation allowance can be given to employees to encourage them to take mass transit to work, participate in a van pool or to pay for qualified parking. Up to $255 per month is tax exempt. In addition, businesses can reimburse employees up to $20 per month for riding their bicycle to work if they are not given another commuting benefit in the same month. 
  11. Achievement Awards – Businesses can award employees up to $1,600 per year in tangible personal property for length of service or safety awards. 
  12. De Minimis Benefits – Low-value, infrequent benefits such as food, cakes, ice-cream, chair massages, etc. are not taxable if they are not given to employees on a regular basis and are not cash or equivalent to cash. 

Feel free to call us at 610.828.1900 with questions about these and other tax-free benefits you may be able to offer your employees. You can also email Jackie Himes, CPA, tax manager at Jacquelyn.Himes@MCC-CPAs.com or myself at Marty.McCarthy@MCC-CPAs.com . We are always happy to help.
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).