Workers Returning to Office May Face Tax on Employer-Provided Benefits
As more workers return to the office, they may soon find that certain employer-provided benefits that go along with their commute are worth less or even disappear entirely. House Republicans have proposed taxing employees for fringe benefits such as employer-provided transportation, free food, and on-site gyms to help compensate for lost revenue from trillions of dollars in tax cuts championed by President Donald Trump.
Currently, employer-provided transportation benefits, such as transit passes and parking, up to $315 per month, are excluded from taxable income. Employer-provided meals and lodging are also generally excluded from taxable income if they are for the employer’s convenience, and employer-provided on-site gym facilities for employees and their families are excluded from taxable income.
If enacted, workers would likely have to pay income tax on the fair market value of the fringe benefits they are getting from their employer, making these benefits less valuable to employees when taxes are factored in. Companies may decide to cover the additional tax burden for employees in part or in full, but this could be an expensive undertaking. Some companies may stop offering certain or all affected fringe benefits altogether, which could cause other problems for employers.
Worker morale and productivity could take a hit if these benefits are taken away or taxed. “If you start charging employees for parking when they’ve had free parking forever, that’s going to be a lot of unhappy employees,” said Jeff Martin, tax principal at Grant Thornton’s Washington National Tax Office.
Companies may pivot to other types of perks that aren’t taxable, such as financial education, coaching, and planning. Competition could also be a factor, with companies evaluating their population and what’s important to them. In the end, the money to fund expensive tax cuts has to come from somewhere, and unpopular tax measures may have to be implemented to offset the cost.
