How to Calculate Taxable Benefits

by Owen E. Richason IV

Taxable benefits comprise noncash benefits that are extended to an employee by her employer. These benefits are therefore part of the employee’s gross income and subject to taxation. These benefits may include but are not limited to relocation assistance, legal assistance, child care assistance and transportation assistance. You can calculate taxable benefits by determining which benefits are considered part of your gross income.

1. Make a list all benefits received from your employer. These benefits should include transportation assistance, legal assistance, relocation assistance, child care assistance and bonuses (the IRS lists bonuses as a taxable benefit because they are considered a part of an employee’s gross income). To identify which benefits are considered taxable, refer to the Internal Revenue Service’s Taxable Fringe Benefits Guide.

2. Categorize all taxable benefits. Note that all taxable benefits are identified by their IRS categorization (each will be a part of an IRS categorization for the taxable percent or amount of a particular benefit). For instance, relocation assistance is not taxable if it is granted as part of the Uniform Relocation Assistance Program, but is taxable as part of an employee’s gross pay if not provided under the auspices of the URAP.

3. Determine the total amount of taxable benefits. The total amount of tax liabilities on taxable benefits varies depending on a wage earner’s income level, the amount contributed by the employee, deduction eligibility (such as moving expenses) and any exemptions or deferments afforded by the IRS.

Items you will need

  • IRS’s Taxable Fringe Benefit Guide

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