A fringe benefit is a form of payment for the performance of services. For example, you provide an employee with a fringe benefit when you allow them to use a business vehicle to commute to and from work.
Fringe benefits are generally included in an employee’s gross income. The benefits are subject to income tax withholding and employment taxes. Fringe benefits include cars and flights on aircraft that the employer provides, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events.
According to the rules of the Internal Revenue Service (IRS), several fringe benefits are free of tax rates. An example of fringe benefits excluded from taxes are de minimis meals and certain transportation benefits.
In this article, we will highlight these two relevant examples, but you can find all tax-free fringe benefits and more information in Publication 15 of the Department of the Treasury for 2022 or for 2023.