02/03/2025
𝐓𝐀𝐗-𝐅𝐑𝐄𝐄 𝐅𝐑𝐈𝐍𝐆𝐄 𝐁𝐄𝐍𝐄𝐅𝐈𝐓𝐒
As an employer, you've probably heard about benefits, but let's talk about something specific: tax-free fringe benefits. These are perks you can offer to your employees that don't get taxed like regular income. And guess what? They can be a game-changer in attracting and keeping great talent in your dental practice. Plus, here's a bonus: 𝐲𝐨𝐮 𝐜𝐚𝐧 𝐝𝐞𝐝𝐮𝐜𝐭 𝐭𝐡𝐞𝐬𝐞 𝐞𝐱𝐩𝐞𝐧𝐬𝐞𝐬, and your employees (including you, the boss) don't pay tax on them!
So, what are these tax-free goodies?
𝟏. 𝐇𝐞𝐚𝐥𝐭𝐡 𝐁𝐞𝐧𝐞𝐟𝐢𝐭𝐬: This one's crucial. You can offer health, dental, and vision insurance, and even help with uninsured health-related costs without your employees paying taxes on these benefits.
𝟐. 𝐋𝐨𝐧𝐠-𝐭𝐞𝐫𝐦 𝐂𝐚𝐫𝐞 𝐈𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞: Covers nursing home costs, and the premiums you pay aren't taxable. However, there are limits on the benefits received.
𝟑. 𝐆𝐫𝐨𝐮𝐩 𝐓𝐞𝐫𝐦 𝐋𝐢𝐟𝐞 𝐈𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞: You can provide up to $50,000 in life insurance per employee tax-free. If it's more, the excess is taxed at a favorable rate.
𝟒. 𝐃𝐢𝐬𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐈𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞: If you pay disability insurance premiums for an employee (and they are the beneficiary), these premiums aren't counted as their income. However, the employee must pay income tax on any disability benefits received under the policy. Exception: disability payments for severe injuries or loss of limbs are tax-free.
𝟓. 𝐄𝐝𝐮𝐜𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐀𝐬𝐬𝐢𝐬𝐭𝐚𝐧𝐜𝐞: You can pay up to $5,250 yearly for your employees' education-related expenses, such as tuition, fees, and books, tax-free. (As a side note: this can include members of your family! We will cover more on this on the next few weeks).
𝟔. 𝐃𝐞𝐩𝐞𝐧𝐝𝐞𝐧𝐭 𝐂𝐚𝐫𝐞 𝐀𝐬𝐬𝐢𝐬𝐭𝐚𝐧𝐜𝐞: Up to $5,000 can be given tax-free for dependent care, like child daycare expenses. But remember, you can't claim both this benefit and a tax credit for the same expenses.
𝟕. 𝐓𝐫𝐚𝐧𝐬𝐩𝐨𝐫𝐭𝐚𝐭𝐢𝐨𝐧 𝐁𝐞𝐧𝐞𝐟𝐢𝐭𝐬: You can cover up to $270 monthly for employee parking, or $255 for vanpool or mass transit passes, tax-free. Although such benefits remain tax free to the employees, as a result of the Tax Cuts and Jobs Act ("TCJA"), employers are not allowed to deduct the cost during 2018 through 2025.
𝟖. 𝗪𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐨𝐧𝐝𝐢𝐭𝐢𝐨𝐧 𝐅𝐫𝐢𝐧𝐠𝐞 𝐁𝐞𝐧𝐞𝐟𝐢𝐭𝐬: Working condition fringes are anything your employer provides or pays for that you need to do your job—for example, local and long distance travel for business, business-related meals and entertainment, professional publications, and company cars used for business driving.
𝟗. 𝐎𝐭𝐡𝐞𝐫 𝐅𝐫𝐢𝐧𝐠𝐞 𝐁𝐞𝐧𝐞𝐟𝐢𝐭𝐬: Other tax-free employee fringe benefits include employee stock options, employee discounts (up to 20% off), meals provided for the employer's convenience (not deductible by the employer after 2025), adoption assistance, achievement awards (not including cash, gift cards, vacations, meals, lodging, theater or sporting tickets, stocks, or bonds), and retirement planning help, employee gyms, and free services provided to employees. Other de minimis (minimal) benefits can also be provided. These are things that cost very little like occasional parties or picnics for employees, and occasional tickets for entertainment or sporting events.
Offering these benefits not only makes your practice an attractive place to work but also helps you save on taxes. It's a win-win! Remember, it's always a good idea to consult a financial expert to make sure you're getting the most out of these perks for both you and your team.
