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Trump Uncertainty With Tax-Exempt Fringe Benefits

“A gift consists not in what is done or given, but in the intention of the giver or doer.”

― Seneca, Moral Essays: Volume III

Small business owners can bank on the idea of “consistent inconsistency” tax planfor the next 46 months. We’re barely two months into the pressure cooker that is the Trump presidency; there’s no clear tax plan yet, and the ideas being floated are divisive-at-best.

Because of this uncertainty, clients often ask me how they can protect their businesses from any fallout. My response is to make the efforts to save on corporate taxes by offering and enhancing fringe benefits. Fringe benefits are additional incentives employers use to retain employees and maintain a high morale. They can vary from free meals to employer-sponsored health care. The employees may pay taxes on certain ones but these benefits are tax deductible expenses for employers.

Some of the examples below may help keep your employees happy and your business running smoothly.

Getting To Work: Commuter Benefits

There’s a $255 exemption for transportation benefits that includes qualified parking, a transit pass, or a commuter highway vehicle, like a vanpool.

If you have local employees who bike to work, they may be able to claim a $20 monthly exemption for their bicycles but only if they do not claim another transportation benefit. For example, a Long Island Railroad commuter who brings a bike on the train to Manhattan to get to your office cannot claim both – it’d be smarter to only claim the monthly LIRR pass.

The Little Things

There are small benefits that are not taxable, such as movie or theater tickets or hosting an in-house happy hour. This is a chance for you to get creative and maybe make the benefit match your company culture. You might be able to acquire these perks via barter deals with clients or neighboring businesses.

As long as these benefits are infrequent, they should be tax liability-free. It’s important to note, however, that cash and cash-equivalent benefits (like gift cards) are taxable.

At Least You Have Your Health…

Contributions to employee’s health, accident and long-term insurance care are generally tax-exempt. This also includes reimbursements for medical expenses. Additionally, enrolling in high-deductible health plans and health savings accounts can also be an effective tax strategy as long as it is initiated efficiently.

Thinking About The Future Yours and Theirs

While we typically discuss your own retirement plans and needs, it can be mutually beneficial to consider your employees’ long-term financial goals. The informational services you provide for 401(k) plans and pensions plans are not taxable. What is taxable, however, are the services that may come with them. This includes tax preparation or brokerage services, for example.

There are several other tax-exempt fringe benefits that may be wise to offer as both a cost-saving measure and a way to retain talent.  Contact Brinen & Associates to discuss the offerings that might best suit your business.

 

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