Common Employee Tax Benefits From Work
When considering a new job, it is important to not only consider the salary or hourly rate you are going to make but also the benefits package you will be entitled to as an employee. There are many companies that offer the standard health insurance benefits and there are also some businesses that offer more.
Fringe benefits are the extras employers have access to in addition to insurance and retirement plans. This may include use of a company vehicle, on-site daycares, free meals, educational reimbursements, or a company gym membership. These additional benefits are typically offered to keep employees feeling appreciated and to retain workers for as long as possible.
You may have heard of the outstanding work environments at places like Google or Zappos but there are hundreds of other employers that cater to their staff by offering everything from free vacations to monthly happy hours.
There are less traditional benefits you may be offered by your employer but ones which are still worthy of your time. Some of these benefits may not apply to you but those that do should be researched and confirmed with your tax adviser. Here are some of the more common types of benefits that can give you some savings on your income tax responsibilities:
Flex Spending Accounts (FSAs)
Flexible spending accounts use pre-tax dollars to pay for eligible expenses including health care that may arise throughout the year. These types of account will lower your income annually so you will face less tax responsibilities in the year. The amount of the expense you incur is not lowered but you are essentially saving cash on expenses you have to pay anyway because you are using money that has not been taxed.
Health Savings Accounts (HSAs)
Again, using the same principles as FSAs, employees can deposit pre-tax money from direct payroll deposits to cover future medical expenses. Approved expenses under these accounts may include copays, examinations, lab testing, prescriptions, and dental work. They can include other dental, vision, health, and pharmacy expenses.
Dependent Care Benefits
If you have dependents that need car during the day/evening while you are at work, you can take a pre-tax payroll deduction to cover these expenses in advance if you do not which to take a Dependent Care Tax Credit. You can receive more of a tax savings annually by claiming this tax credit. Dependents must be under the age of 13 or anyone who is a tax dependent on your income including your elderly parent who cannot take care of themselves and as a result lives at your residence. Spouses may also be included if they are not capable of self-care and care is necessary so you can continue working.
Income tax credits can be provided through transportation benefits offered by your employer. Employers may either provide bus, train, or other transportation passes for a month for commuters or a reimbursement of expenses for parking. The IRS allows for $125 a month pass benefit or $240 a month for parking. Those that opt to bike into work can also get reimbursement for up to $20 a month for certain kinds of approved expenses. Pre-tax dollars are used to lower commuting expenses throughout the year.
If you are currently unaware of what kind of fringe benefits are provided by your employer outside of the basic health benefits, now is a good time to check into it. Your human resource representative can provide you with the appropriate information. If you have been working for several years at the same company, remember that your personal situation and needs may have changed from when you originally started working. You may have opted out of these other benefit programs because you did not need them at the time.
Take the time to review what benefits are being offered and if you are unsure of how to use them to your (tax) advantage, speak with your tax preparer or your financial advisor to determine which benefit accounts you should be funding to get the most benefits when tax time rolls around.
Simon Zhen is a research analyst for MyBankTracker. He is an expert on consumer banking products, bank innovations, and financial technology.
Simon has contributed and/or been quoted in major publications and outlets including Consumer Reports, American Banker, Yahoo Finance, U.S. News – World Report, The Huffington Post, Business Insider, Lifehacker, and AOL.com.