Do you know how much do you earn? (Hint: If your employer provides benefits, it’s actually more than you think.)
See, if your salary is $50,000, you don’t earn just $50,000. The actual value of your pay is comprised of both salary and benefits, which is generally much much than your base salary. As an added bonus, the value of many fringe benefits (insurance or vacation, for example) is not included in your taxable income.
So the next time you’re job-searching for a job or bemoaning your meager hourly wage, don’t forget to consider the value of fringe benefits. Companies that offer fabulous fringe benefits could be the best company to work for in the long run. Here are 15 common fringe benefits that won’t raise your taxable income:
1. Education Assistance. If your employer pays for your tuition and textbooks, you won’t be taxed on that benefit up to $5,250. Basically, you can go to school on your employer’s dime and improve your job skills. It’s a win for both you and your employer.
2. Health/Life/Accident Insurance. The most well-known fringe benefit, but arguably the most important. Both you and your employer pay premiums on your health insurance plan (usually your employer pays a higher premium than you). The premiums that both you and your employer pay are not included in your taxable income.
3. Length of Service Awards. If you receive small awards recognizing the amount of time you’ve worked for your employer, you won’t be taxed on these awards. The awards must be small property awards and cannot be cash or cash equivalents to qualify for the exclusion.
4. Adoption Assistance. Although subject to limitations, if your employer assists you in the adoption of a child, this benefit could be excluded from your income. Employer-provided adoption assistance is usually in the form of financial assistance, informational resources, or parental leave policies.
5. Athletic Facilities. Some companies provide workout facilities for their employees and their families. The facility must be on company premises and must be owned and operated by the employer. Off-site gyms that your company pays for do not qualify.
6. Employee Discounts. This is a popular perk at retail stores and dining establishments. Many people look for part-time jobs at companies like this just to receive an employee discount. If you do receive a company discount, the benefit you receive won’t be taxed.
7. Employee Stock Options. Certain stock options are not taxed upon exercise. Stock options are non-cash compensation in the form of shares of the employer’s stock. When the options are exercised, there is no taxable event; however, when the shares are sold, the owner may be subject to capital gains tax.
8. De Minimis Benefits. De minimis benefits are benefits so small that they cannot be valued per employee. Some common de minimis benefits include small holiday gifts, donuts/treats/bagels, occasional parties or events, among other small but regular benefits. De minimis benefits are very common among workplaces, but luckily do not affect taxable income.
9. Health Savings Accounts (HSA). If available, employees and employers can contribute to an HSA. The amounts that the employer contributes are not included in the employee’s income. The distributions from the account are not subject to taxes and can be used to purchase qualified medical items.
10. Meals. Meals provided by an employer are not taxable. Meals can sometimes overlap with the de minimis benefits explained above. Some employers provide regular meals on their premises for employees. If your employer provides meals as a convenience for them, then the meals are not included in your income.
11. Moving Expense Reimbursements. When you relocate for a job, you’ll likely incur moving expenses. If these expenses are reimbursed by your employer, you will not include the reimbursement in your income. If, however, your employer doesn’t reimburse you for moving expenses, you could deduct them as an above the line deduction.
12. Retirement Plan Matching. Many employers match employee contributions to a retirement plan up to a certain amount. The amounts are not included in your taxable income today. However, when you retire and begin to withdraw money from your retirement account, you will be taxed on that money – including the amount your employer contributed.
13. Time Off Awards. Time off awards can be given instead of cash or cash equivalent awards for superior performance or other achievements. Since time-off awards have no cash value, they cannot be taxed. However, the salary that you earn on the days that you take the time off will be included in your taxable income. Although these awards aren’t technically a fringe benefit, it’s important to note that they aren’t included in taxable income.
14. Paid Vacation. This is an extremely common fringe benefit and arguably the most lucrative. Paid vacation is just that – getting paid to take time off from work. Paid vacation is similar to time off awards, but is more automatic. You’ll know how much paid vacation you’ll receive at a job, while a time off award is often a surprise.
15. Sick Leave. This is another well-known benefit of employment. Sick leave is usually necessary when you’re working a full-time job. Although rules differ between companies, employees can usually take paid time off for illnesses, doctor’s appointments, or funerals.
As you can see, salary isn’t the only perk of having a great job. Fringe benefits can often make a lesser-paying job much more attractive. The biggest benefit is that many fringe benefits will never affect your taxable income – meaning that you can enjoy them free of charge.
Have I left anything out? What fringe benefits do you enjoy?