---
title: Help Retain Employees with Tax-Free Fringe Benefits | SVA
description: Fringe benefits are an important incentive — especially those that are tax-free. Here’s a rundown of some common perks and their tax implications.
---

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# [Help Retain Employees with Tax-Free Fringe Benefits | SVA](https://accountants.sva.com/biz-tips/help-retain-employees-with-tax-free-fringe-benefits)

 Written by [SVA Certified Public Accountants](https://accountants.sva.com/biz-tips/author/sva-certified-public-accountants) | Dec 22, 2016

One way your business can find and keep valuable employees is to offer an attractive compensation package. Fringe benefits are an important incentive — especially those that are tax-free.

## Common Fringe Benefits

Here’s a rundown of some common perks and their tax implications.

### Medical Coverage

If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages, but are deductible on a limited basis as itemized deductions. Employers must meet a number of requirements when providing coverage. For instance, benefits must be provided through a group health plan (fully insured or self-insured).

### Disability Insurance

Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or other contributions to the plan) generally aren’t deductible by them or excludable from their income. However, they can make pretax contributions to a cafeteria plan for disability benefits, which are excludable from their income.

### Long-Term Care Insurance

Your premium payments aren’t taxable to employees. However, long-term care insurance can’t be provided through a cafeteria plan.

### Life Insurance

Your employees generally can exclude from gross income premiums you pay on up to $50,000 of qualified group term life insurance coverage. Premiums you pay for qualified coverage exceeding $50,000 are taxable to the extent they exceed the employee’s coverage contributions.

### Dependent Care

You can provide employees with tax-free dependent care assistance up to certain limits during the year.

### Educational Assistance

You can help employees on a tax-free basis through educational assistance plans (up to $5,250 per year), job-related educational assistance, and qualified scholarships.

Other tax-free benefits include adoption assistance (up to a certain amount), on-premises athletic facilities, and meals provided occasionally to employees who work overtime.

Contact us for more information about how to treat fringe benefits for tax purposes.

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