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Are fringe benefits from an employer taxable income?

On Behalf of | Oct 2, 2015 | Tax Controversies

Complimentary coffee, pastries or an occasional pizza are nice perks to get from your employer. But they are generally not considered taxable income because their value is de minimis.

It may be a different story, however, when an employer-provided perk is more valuable, such as a company-provided car.

Are fringe benefits taxable? And if so, which ones?

“De minimis” is a Latin expression for something too small or minor to merit consideration. In other words, de minimis means minimal. But how minimal does a benefit have to be in order to be too minimal to be taxable income?

The general rule, after all, is that fringe benefits are taxable. It is only when the benefits are merely “de minimis” that they are not taxed.

Let’s look at a few of the examples the IRS uses of de minimis benefits.

Suppose you get a gag gift at the company holiday party. Technically, the receipt of this item is income. But in practical terms, it does not make sense to tax non-cash holiday gifts with little fair market value.

The same reasoning applies to occasional company picnics or the distribution of occasional tickets to sports or entertainment events.

It is important to realize, however, that de minimis items like these are an exception to the general rule that fringe benefits are generally taxable.

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