Ask For Tax-advantaged Employee Benefits From Your Employer
August 23, 2017
Other than the regular pay, don't forget to ask your employer about the following tax-advantaged employee benefits:
• Dependent Care Benefits
—If you paid someone to care for your child, spouse, or dependent so you can work, you should check to see if your employer has a dependent care program. You may be able to exclude up to $5,000 ($2,500 if Married Filing Separately) of qualified expenses from your wages, which usually provides a more significant tax benefit than the child and dependent care credit.
• Health Care Insurance
—Many employers offer income-excludable group medical and dental plans. Employers are allowed, but not required, to provide insurance coverage for your children under the age of 26.
• 401(k) or Similar Retirement Plans
—If your employer has a 401(k) plan, you can elect to defer (pre-tax) a maximum of $18,000 for 2017. ($24,000 if you are 50 and older). These plans are especially beneficial when the employer provides a matching contribution.
• Flexible Spending Accounts
— It's a special account that you can put money into that you use to pay for certain out-of-pocket health care costs. You don't pay taxes on this money. 2017 limit is $2,600 per employer. If you’re married, your spouse can put up to $2,600 in an FSA with their employer too. However, you generally must use the money in an FSA within the plan year. At the end of the year or grace period, you lose any money left over in your FSA.
• Health savings account
— Is a tax-exempt account you set up pay or reimburse certain medical expenses you incur. You must be covered under a high deductible health plan. You do not need an employer to set up an HSA account. However, contributions to your HSA made by your employer may be excluded from your gross income. You do not have to use it before the plan year end, and earrings on the account are tax-free.
• Educational Assistance Programs
—Employer pays for tax-free educational expenses up to $5,250 per year. The expenses include tuition and fees, books, supplies and equipment and the courses don't have to be part of a degree program.
• Stock Purchase and Option Plans
—A variety of plans designed to allow the employees to invest in the employer’s stock at favorable prices.
• Tax-Free Fringe Benefits
—If the employer provides them, the law allows an exclusion from the employee’s taxable income for the following benefits:
(1) The cost of up to $50,000 of group-term life insurance.
(2) $255 (in 2017) per month for qualified parking.
(3) $255 (in 2017) per month for transit passes and commuter transportation.
(4) $20 per month for bicycle commuting expenses.
If you have any questions related to these employer-provided benefits, please give this office a call.
Circular 230:The articles are for general information only. In accordance with IRS Circular 230 they are not considered tax opinions for purposes of relying on such statements in any challenge of the reporting of the above transaction by the IRS. If a full tax opinion is required certain procedures must be met . Also there is a significant cost for a full tax opinion to meet the requirements of Circular 230.
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