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What Fringe Benefits Am I Paying Taxes On? 
by kmhagen July 22, 2005

Athletic Facilities

If your employer allows you and your dependents to use a gym or other athletic facility on the employer’s premises, the value is not included in your compensation and is not taxable. The athletic facilities must be on property owned or leased by your employer, but do not necessarily have to be on its business premises. The athletic facility must be principally for use by employees, their spouses, and dependent children during the entire year. However, if your employer pays for an athletic program at an off-site facility, the value of the program is taxable income to you.

De Minimus (Minimal) Benefits

The value of products and services that your employer provides you, that have a low cost, such as a company cafeteria, cab fares home when working overtime, and company picnics, are not included in your income. If your employer gives you a holiday gift, such as a ham or turkey, this is not included in your income either. But if your employer gives you cash, a gift certificate, or a similar item that can be readily converted to cash, that amount is included in your taxable income.

Dependent Care Benefits

These are benefits that your employer pays directly to you or to a care provider to care for your qualifying person while you work, or the fair market value of care in a daycare facility provided or sponsored by your employer. These benefits are reported in box 10 of your W-2. You can exclude these benefits from your income, up to a maximum of $5,000 ($2,500 if married filing separately). Any benefits over $5,000 will be included in box 1 of your W-2 as taxable compensation.

To exclude dependent care benefits paid or provided by your employer, you will need to file Form 2441, Child and Dependent Care Expenses, if you file Form 1040, or Schedule 2 if you file Form 1040A.

Dependent care benefits that favor highly compensated employees are not excludible. For these purposes, a highly compensated employee is one who owned 5% or more of the employer’s stock at any time during the current or preceding year, or who earned over a certain amount (published by the IRS) and was in the top 20% of employees in terms of pay ranking during the preceding year.

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