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            Department of the Treasury                        Contents
            Internal Revenue Service
                                                              What's New. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    1
                                                              Reminders    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Publication 15-B
Cat. No. 29744N                                               Introduction   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
                                                              1. Fringe Benefit Overview . . . . . . . . . . . . . . . . . . .           3
                                                              2. Fringe Benefit Exclusion Rules              . . . . . . . . . . . . . . 5
Employer's 
                                                              Accident and Health Benefits . . . . . . . . . . . . . . . .               5
                                                              Achievement Awards               . . . . . . . . . . . . . . . . . . . . . 7
Tax Guide to                                                  Adoption Assistance . . . . . . . . . . . . . . . . . . . . . .            8
                                                              Athletic Facilities . . . . . . . . . . . . . . . . . . . . . . . . .      9
                                                              De Minimis (Minimal) Benefits . . . . . . . . . . . . . . .                9
Fringe
                                                              Dependent Care Assistance                  . . . . . . . . . . . . . . .   10
                                                              Educational Assistance . . . . . . . . . . . . . . . . . . .               10
Benefits                                                      Employee Discounts . . . . . . . . . . . . . . . . . . . . .               11
                                                              Employee Stock Options . . . . . . . . . . . . . . . . . .                 12
                                                              Employer-Provided Cell Phones                  . . . . . . . . . . . . .   13
For use in 2024                                               Group-Term Life Insurance Coverage . . . . . . . . .                       13
                                                              Health Savings Accounts (HSAs) . . . . . . . . . . . .                     15
                                                              Lodging on Your Business Premises                    . . . . . . . . . .   16
                                                              Meals        . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
                                                              No-Additional-Cost Services                . . . . . . . . . . . . . . .   19
                                                              Retirement Planning Services                 . . . . . . . . . . . . . .   20
                                                              Transportation (Commuting) Benefits . . . . . . . . .                      20
                                                              Tuition Reduction          . . . . . . . . . . . . . . . . . . . . . . .   22
                                                              Working Condition Benefits . . . . . . . . . . . . . . . .                 22
                                                              3. Fringe Benefit Valuation Rules . . . . . . . . . . . . .                25
                                                              General Valuation Rule             . . . . . . . . . . . . . . . . . . .   25
                                                              Cents-Per-Mile Rule            . . . . . . . . . . . . . . . . . . . . .   25
                                                              Commuting Rule           . . . . . . . . . . . . . . . . . . . . . . . .   26
                                                              Lease Value Rule           . . . . . . . . . . . . . . . . . . . . . . .   27
                                                              Unsafe Conditions Commuting Rule . . . . . . . . . .                       29
                                                              4. Rules for Withholding, Depositing, and 
                                                              Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . .          30
                                                              How To Get Tax Help        . . . . . . . . . . . . . . . . . . . . . . .   31
                                                              Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35

                                                              Future Developments
                                                              For  the  latest  information  about  developments  related  to 
                                                              Pub.  15-B,  such  as  legislation  enacted  after  it  was 
                                                              published, go to   IRS.gov/Pub15B. For the latest guidance 
                                                              and information about COVID-19 tax relief, go to                   IRS.gov/
                                                              Coronavirus.

Get forms and other information faster and easier at:
• IRS.gov (English)         • IRS.gov/Korean (한국어)            What's New
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) 
• IRS.gov/Chinese (中文)      • IRS.gov/Vietnamese (Tiếng Việt) Cents-per-mile rule.         The business mileage rate for 2024 
                                                              is 67 cents per mile. You may use this rate to reimburse an 
                                                              employee  for  business  use  of  a  personal  vehicle,  and 

Dec 14, 2023

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under certain conditions, you may use the rate under the residence. Two individuals who enter into a relationship
cents-per-mile rule to value the personal use of a vehicle that is denominated as a marriage under the laws of a for-
you provide to an employee. See Cents-Per-Mile Rule in eign jurisdiction are recognized as married for federal tax
section 3. purposes if the relationship would be recognized as a
Qualified parking exclusion and commuter transpor- marriage under the laws of at least one state or territory of
tation benefit. For 2024, the monthly exclusion for quali- the United States, regardless of legal residence. Individu-
fied parking is $315 and the monthly exclusion for com- als who have entered into a registered domestic partner-
muter highway vehicle transportation and transit passes is ship, civil union, or other similar relationship that isn't de-
$315. See Qualified Transportation Benefits in section 2. nominated as a marriage under the law of the state or
territory of the United States where such relationship was
Contribution limit on a health flexible spending ar- entered into aren't lawfully married for federal tax purpo-
rangement (FSA). For plan years beginning in 2024, a ses, regardless of legal residence.
cafeteria plan may not allow an employee to request sal-
Notice 2014-1 discusses how certain rules for cafeteria
ary reduction contributions for a health FSA in excess of
plans, including health and dependent care FSAs, and
$3,200.
health savings accounts (HSAs) apply to same-sex spou-
ses participating in employee benefit plans. Notice
2014-1, 2014-2 I.R.B. 270, is available at IRS.gov/irb/
Reminders 2014-02_IRB#NOT-2014-1.
Moving expense reimbursements. P.L. 115-97, Tax Getting tax forms, instructions, and publications.
Cuts and Jobs Act, suspends the exclusion for qualified Visit IRS.gov/Forms to download current and prior-year
moving expense reimbursements from your employee's forms, instructions, and publications.
income for tax years beginning after 2017 and before Ordering tax forms, instructions, and publications.
2026. However, the exclusion is still available in the case Go to IRS.gov/OrderForms to order current forms, instruc-
of a member of the U.S. Armed Forces on active duty who tions, and publications; call 800-829-3676 to order
moves because of a permanent change of station due to a prior-year forms and instructions. The IRS will process
military order. The exclusion applies only to reimburse- your order as soon as possible. Don’t resubmit requests
ment of moving expenses that the member could deduct if you've already sent us. You can get forms, instructions,
they had paid or incurred them without reimbursement. and publications faster online.
See Moving Expenses in Pub. 3, Armed Forces' Tax Getting answers to your tax questions. If you have a
Guide, for the definition of what constitutes a permanent tax question not answered by this publication, check
change of station and to learn which moving expenses are IRS.gov and How To Get Tax Help at the end of this publi-
deductible. cation.
Bicycle commuting reimbursements. P.L. 115-97 sus- Photographs of missing children. The IRS is a proud
pends the exclusion of qualified bicycle commuting reim- partner with the National Center for Missing & Exploited
bursements from your employee's income for tax years Children® (NCMEC). Photographs of missing children se-
beginning after 2017 and before 2026. See Transportation lected by the Center may appear in this publication on pa-
(Commuting) Benefits in section 2. ges that would otherwise be blank. You can help bring
Withholding on supplemental wages. P.L. 115-97 low- these children home by looking at the photographs and
ered the federal income tax withholding rates on supple- calling 1-800-THE-LOST (1-800-843-5678) if you recog-
mental wages for tax years beginning after 2017 and be- nize a child.
fore 2026. See Withholding and depositing taxes in
section 4 for the withholding rates.
Form 1099-NEC, Nonemployee Compensation. Use
Introduction
Form 1099-NEC to report nonemployee compensation
paid in 2023. The 2023 Form 1099-NEC is due January This publication supplements Pub. 15, Employer's Tax
31, 2024. Guide, and Pub. 15-A, Employer's Supplemental Tax
Additional permitted election changes for health cov- Guide. It contains information for employers on the em-
erage under a cafeteria plan. Notice 2014-55, 2014-41 ployment tax treatment of fringe benefits.
I.R.B. 672, available at IRS.gov/irb/
Comments and suggestions. We welcome your com-
2014-41_IRB#NOT-2014-55, expands the application of
ments about this publication and your suggestions for fu-
the permitted change rules for health coverage under a
ture editions.
cafeteria plan and discusses two specific situations in
You can send us comments through IRS.gov/
which a cafeteria plan participant is permitted to revoke
FormComments.
their election under a cafeteria plan during a period of cov-
Or you can write to:
erage.
Definition of marriage. A marriage of two individuals is Internal Revenue Service
recognized for federal tax purposes if the marriage is rec- Tax Forms and Publications
ognized by the state or territory of the United States in 1111 Constitution Ave. NW, IR-6526
which the marriage is entered into, regardless of legal Washington, DC 20224

2 Publication 15-B (2024)

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Although we can't respond individually to each com- Statement. However, you can use special rules to with-
ment received, we do appreciate your feedback and will hold, deposit, and report the employment taxes. These
consider your comments as we revise our tax forms, in- rules are discussed in section 4.
structions, and publications. Don’t send tax questions, tax If the recipient of a taxable fringe benefit isn't your em-
returns, or payments to this address. ployee, the benefit isn't subject to employment taxes.
However, you may have to report the benefit on one of the
following information returns.
1. Fringe Benefit Overview
IF the recipient
A fringe benefit is a form of pay for the performance of receives the benefit
as... THEN use...
services. For example, you provide an employee with a
fringe benefit when you allow the employee to use a busi- an independent Form 1099-NEC.
ness vehicle to commute to and from work. contractor
a partner Schedule K-1 (Form 1065), Partner's
Performance of services. A person who performs serv- Share of Income, Deductions, Credits,
ices for you doesn't have to be your employee. A person etc.
may perform services for you as an independent contrac-
tor, partner, or director. Also, for fringe benefit purposes, For more information, see the instructions for the forms lis-
treat a person who agrees not to perform services (such ted above.
as under a covenant not to compete) as performing serv-
ices. Cafeteria Plans
Provider of benefit. You’re the provider of a fringe bene-
A cafeteria plan, including an FSA, provides participants
fit if it is provided for services performed for you. You’re
an opportunity to receive qualified benefits on a pre-tax
considered the provider of a fringe benefit even if a third
basis. It is a written plan that allows your employees to
party, such as your client or customer, provides the benefit
choose between receiving cash or taxable benefits, in-
to your employee for services the employee performs for
stead of certain qualified benefits for which the law pro-
you. For example, if, in exchange for goods or services,
vides an exclusion from wages. If an employee chooses to
your customer provides daycare services as a fringe ben-
receive a qualified benefit under the plan, the fact that the
efit to your employees for services they provide for you as
employee could have received cash or a taxable benefit
their employer, then you’re the provider of this fringe bene-
instead won't make the qualified benefit taxable.
fit even though the customer is actually providing the day-
care. Generally, a cafeteria plan doesn't include any plan that
offers a benefit that defers pay. However, a cafeteria plan
Recipient of benefit. The person who performs services
can include a qualified 401(k) plan as a benefit. Also, cer-
for you is considered the recipient of a fringe benefit provi-
tain life insurance plans maintained by educational institu-
ded for those services. That person may be considered
tions can be offered as a benefit even though they defer
the recipient even if the benefit is provided to someone
pay.
who didn't perform services for you. For example, your
employee may be the recipient of a fringe benefit you pro- Qualified benefits. A cafeteria plan can include the fol-
vide to a member of the employee's family. lowing benefits discussed in section 2.
• Accident and health benefits (but not Archer medical
Are Fringe Benefits Taxable? savings accounts (Archer MSAs) or long-term care in-
Any fringe benefit you provide is taxable and must be in- surance).
cluded in the recipient's pay unless the law specifically ex- • Adoption assistance.
cludes it. Section 2 discusses the exclusions that apply to
certain fringe benefits. Any benefit not excluded under the • Dependent care assistance.
rules discussed in section 2 is taxable. • Group-term life insurance coverage (including costs
that can't be excluded from wages).
Including taxable benefits in pay. You must include in
a recipient's pay the amount by which the value of a fringe • HSAs. Distributions from an HSA may be used to pay
benefit is more than the sum of the following amounts. eligible long-term care insurance premiums or to pay
for qualified long-term care services.
• Any amount the law excludes from pay.
Benefits not allowed. A cafeteria plan can't include the
• Any amount the recipient paid for the benefit.
following benefits discussed in section 2.
The rules used to determine the value of a fringe benefit
are discussed in section 3. • Archer MSAs. See Accident and Health Benefits in
If the recipient of a taxable fringe benefit is your em- section 2.
ployee, the benefit is generally subject to employment • Athletic facilities.
taxes and must be reported on Form W-2, Wage and Tax
• De minimis (minimal) benefits.

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• Educational assistance. Plans that favor highly compensated employees. If
your plan favors highly compensated employees as to eli-
• Employee discounts.
gibility to participate, contributions, or benefits, you must
• Employer-provided cell phones. include in their wages the value of taxable benefits they
• Lodging on your business premises. could have selected. A plan you maintain under a collec-
tive bargaining agreement doesn't favor highly compensa-
• Meals. ted employees.
• No-additional-cost services. A highly compensated employee for this purpose is any
of the following employees.
• Retirement planning services.
1. An officer.
• Transportation (commuting) benefits.
2. A shareholder who owns more than 5% of the voting
• Tuition reduction.
power or value of all classes of the employer's stock.
• Working condition benefits.
3. An employee who is highly compensated based on
It also can't include scholarships or fellowships (dis- the facts and circumstances.
cussed in Pub. 970).
4. A spouse or dependent of a person described in (1),
Contribution limit on a health FSA. For plan years be- (2), or (3).
ginning in 2024, a cafeteria plan may not allow an em-
ployee to request salary reduction contributions for a Plans that favor key employees. If your plan favors key
health FSA in excess of $3,200. employees, you must include in their wages the value of
A cafeteria plan that doesn't limit health FSA contribu- taxable benefits they could have selected. A plan favors
tions to the dollar limit isn't a cafeteria plan and all benefits key employees if more than 25% of the total of the nontax-
offered under the plan are includible in the employee's able benefits you provide for all employees under the plan
gross income. go to key employees. However, a plan you maintain under
For more information, see Notice 2012-40, 2012-26 a collective bargaining agreement doesn't favor key em-
I.R.B. 1046, available at IRS.gov/irb/ ployees.
2012-26_IRB#NOT-2012-40. A key employee during 2024 is generally an employee
who is either of the following.
“Use-or-lose” rule for health FSAs. Instead of a grace 1. An officer having annual pay of more than $220,000.
period, you may, at your option, amend your cafeteria plan
to allow an employee's unused contributions to carry over 2. An employee who for 2024 is either of the following.
to the immediately following plan year. For more informa-
a. A 5% owner of your business.
tion, see Notice 2013-71, 2013-47 I.R.B. 532, available at
IRS.gov/irb/2013-47_IRB#NOT-2013-71; and Notice b. A 1% owner of your business whose annual pay is
2020-33, 2020-22 I.R.B. 868, available at IRS.gov/irb/ more than $150,000.
2020-22_IRB#NOT-2020-33.
Simple Cafeteria Plans for Small
Employee. For these plans, treat the following individu-
als as employees. Businesses

• A current common-law employee. See section 2 in Eligible employers meeting contribution requirements and
Pub. 15. eligibility and participation requirements can establish a
• A full-time life insurance agent who is a current statu- simple cafeteria plan. Simple cafeteria plans are treated
tory employee. as meeting the nondiscrimination requirements of a cafe-
teria plan and certain benefits under a cafeteria plan.
• A leased employee who has provided services to you
on a substantially full-time basis for at least a year if Eligible employer. You’re an eligible employer if you
the services are performed under your primary direc- employed an average of 100 or fewer employees during
tion or control. either of the 2 preceding years. If your business wasn't in
existence throughout the preceding year, you’re eligible if
Exception for S corporation shareholders. Don't
you reasonably expect to employ an average of 100 or
treat a 2% shareholder of an S corporation as an em-
fewer employees in the current year. If you establish a sim-
ployee of the corporation for this purpose. A 2% share-
ple cafeteria plan in a year that you employ an average of
holder for this purpose is someone who directly or indi-
100 or fewer employees, you’re considered an eligible em-
rectly owns (at any time during the year) more than 2% of
ployer for any subsequent year until the year after you em-
the corporation's stock or stock with more than 2% of the
ploy an average of 200 or more employees.
voting power. Treat a 2% shareholder as you would a part-
ner in a partnership for fringe benefit purposes, but don't Eligibility and participation requirements. These re-
treat the benefit as a reduction in distributions to the 2% quirements are met if all employees who had at least
shareholder. For more information, see Revenue Ruling 1,000 hours of service for the preceding plan year are eli-
91-26, 1991-1 C.B. 184. gible to participate and each employee eligible to

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participate in the plan may elect any benefit available un- • Employee stock options.
der the plan. You may elect to exclude from the plan em-
• Employer-provided cell phones.
ployees who:
• Group-term life insurance coverage.
1. Are under age 21 before the close of the plan year,
• HSAs.
2. Have less than 1 year of service with you as of any
day during the plan year, • Lodging on your business premises.
3. Are covered under a collective bargaining agreement • Meals.
if there is evidence that the benefits covered under the • No-additional-cost services.
cafeteria plan were the subject of good-faith bargain-
ing, or • Retirement planning services.
• Transportation (commuting) benefits.
4. Are nonresident aliens working outside the United
States whose income didn't come from a U.S. source. • Tuition reduction.
Contribution requirements. You must make a contribu- • Working condition benefits.
tion to provide qualified benefits on behalf of each quali- See Table 2-1 for an overview of the employment tax
fied employee in an amount equal to: treatment of these benefits.
1. A uniform percentage (not less than 2%) of the em-
ployee’s compensation for the plan year; or Accident and Health Benefits

2. An amount that is at least 6% of the employee’s com- This exclusion applies to contributions you make to an ac-
pensation for the plan year or twice the amount of the cident or health plan for an employee, including the follow-
salary reduction contributions of each qualified em- ing.
ployee, whichever is less.
• Contributions to the cost of accident or health insur-
If the contribution requirements are met using option (2), ance including qualified long-term care insurance.
the rate of contribution to any salary reduction contribution
of a highly compensated or key employee can't be greater • Contributions to a separate trust or fund that directly or
than the rate of contribution to any other employee. through insurance provides accident or health bene-
fits.
More information. For more information about cafeteria • Contributions to Archer MSAs or HSAs (discussed in
plans, see section 125 of the Internal Revenue Code and Pub. 969).
its regulations.
This exclusion also applies to payments you directly or
indirectly make to an employee under an accident or
health plan for employees that are either of the following.
2. Fringe Benefit Exclusion
• Payments or reimbursements of medical expenses.
Rules Payments for specific permanent injuries (such as the
•
loss of the use of an arm or leg). The payments must
This section discusses the exclusion rules that apply to
be figured without regard to the period the employee is
fringe benefits. These rules exclude all or part of the value
absent from work.
of certain benefits from the recipient's pay.
In most cases, the excluded benefits aren't subject to Accident or health plan. This is an arrangement that
federal income tax withholding, social security tax, Medi- provides benefits for your employees, their spouses, their
care tax, federal unemployment (FUTA) tax, or Railroad dependents, and their children (under age 27 at the end of
Retirement Tax Act (RRTA) taxes and aren't reported on the tax year) in the event of personal injury or sickness.
Form W-2. The plan may be insured or noninsured and doesn't need
to be in writing.
This section discusses the exclusion rules for the fol-
lowing fringe benefits. Employee. For this exclusion, treat the following individ-
• Accident and health benefits. uals as employees.
• Achievement awards. • A current common-law employee.
• Adoption assistance. • A full-time life insurance agent who is a current statu-
tory employee.
• Athletic facilities.
• A retired employee.
• De minimis (minimal) benefits.
• A former employee you maintain coverage for based
• Dependent care assistance. on the employment relationship.
• Educational assistance. A surviving spouse of an individual who died while an
•
• Employee discounts. employee.

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Table 2-1. Special Rules for Various Types of Fringe Benefits
(For more information, see the full discussion in this section.)
Treatment Under Employment Taxes
Type of Fringe Benefit Income Tax Withholding Social Security and Medicare Federal Unemployment (FUTA)
(including Additional Medicare
Tax when wages are paid in 1
excess of $200,000)
Exempt (except 2% Exempt Exempt
Accident and health benefits shareholder-employees of S
corporations).
Achievement awards Exempt up to $1,600 for qualified plan awards ($400 for nonqualified awards).2
Adoption assistance Exempt2,3 Taxable Taxable
Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent
children, and the facility is operated by the employer on premises owned or leased by the employer.
De minimis (minimal) benefits Exempt Exempt Exempt
Dependent care assistance Exempt up to certain limits, $5,000 ($2,500 for married employee filing separate return).3
Educational assistance Exempt up to $5,250 of benefits each year. (See Educational Assistance, later in this section.)
Employee discounts Exempt up to certain limits. (See 3 Employee Discounts, later in this section.)
Employee stock options See Employee Stock Options, later in this section.
Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes.
Exempt Exempt2,4,6 up to cost of $50,000 of Exempt
Group-term life insurance coverage coverage. (Special rules apply to
former employees.)
Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. (See Health Savings Accounts, later in this
section.)
Lodging on your business premises Exempt if furnished on your business premises, for your convenience, and as a condition of employment.2
Exempt if furnished on your business premises for your convenience.2
Meals
Exempt if de minimis.
No-additional-cost services Exempt3 Exempt3 Exempt3
Retirement planning services Exempt5 Exempt5 Exempt5
Exempt up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($315) or qualified 2
Transportation (commuting) benefits parking ($315). (See Transportation (Commuting) Benefits, later in this section.)
Exempt if de minimis.
Tuition reduction Exempt if for undergraduate education (or graduate education if the employee performs teaching or research 3
activities).
Working condition benefits Exempt Exempt Exempt
1 Or other railroad retirement taxes, if applicable.
2 Exemption doesn't apply to S corporation employees who are 2% shareholders.
3 Exemption doesn't apply to certain highly compensated employees under a program that favors those employees.
4 Exemption doesn't apply to certain key employees under a plan that favors those employees.
5 Exemption doesn't apply to services for tax preparation, accounting, legal, or brokerage services.
6 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid
toward the insurance. Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. Also, show it in box 12 with code C. The amount is subject to social
security and Medicare taxes, and you may, at your option, withhold federal income tax.
• A surviving spouse of a retired employee. shareholder is someone who directly or indirectly owns (at
any time during the year) more than 2% of the corpora-
• For the exclusion of contributions to an accident or
tion's stock or stock with more than 2% of the voting
health plan, a leased employee who has provided
power. Treat a 2% shareholder as you would a partner in a
services to you on a substantially full-time basis for at
partnership for fringe benefit purposes, but don't treat the
least a year if the services are performed under your
benefit as a reduction in distributions to the 2% share-
primary direction or control.
holder. For more information, see Revenue Ruling 91-26,
Special rule for certain government plans. For cer- 1991-1 C.B. 184.
tain government accident and health plans, payments to a
deceased employee's beneficiary may qualify for the ex- Exclusion from wages. You can generally exclude the
clusion from gross income if the other requirements for ex- value of accident or health benefits you provide to an em-
clusion are met. See section 105(j) for details. ployee from the employee's wages.
Exception for S corporation shareholders. Don't Exception for certain long-term care benefits. You
treat a 2% shareholder of an S corporation as an em- can't exclude contributions to the cost of long-term care
ployee of the corporation for this purpose. A 2% insurance from an employee's wages subject to federal

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income tax withholding if the coverage is provided through and their family members. A QSEHRA isn’t a group health
a flexible spending or similar arrangement. This is a bene- plan, and, therefore, isn't subject to group health plan re-
fit program that reimburses specified expenses up to a quirements. Generally, payments from a QSEHRA to reim-
maximum amount that is reasonably available to the em- burse an eligible employee’s medical expenses aren’t in-
ployee and is less than five times the total cost of the in- cludible in the employee’s gross income if the employee
surance. However, you can exclude these contributions has coverage that provides minimum essential coverage,
from the employee's wages subject to social security, as defined in section 5000A(f) of the Internal Revenue
Medicare, and FUTA taxes. Code.
A QSEHRA is an arrangement that meets all the follow-
S corporation shareholders. Because you can't
ing requirements.
treat a 2% shareholder of an S corporation as an em-
ployee for this exclusion, you must include the value of ac- 1. The arrangement is funded solely by you, and no sal-
cident or health benefits you provide to the employee in ary reduction contributions may be made under the
the employee's wages subject to federal income tax with- arrangement.
holding. However, you can exclude the value of these ben-
2. The arrangement provides, after the eligible employee
efits (other than payments for specific injuries or illnesses
provides proof of coverage, for the payment or reim-
not made under a plan set up to benefit all employees or
bursement of the medical expenses incurred by the
certain groups of employees) from the employee's wages
employee or the employee’s family members.
subject to social security, Medicare, and FUTA taxes. See
Announcement 92-16 for more information. You can find 3. The amount of payments and reimbursements
Announcement 92-16 on page 53 of Internal Revenue Bul- doesn’t exceed $6,150 ($12,450, for family coverage)
letin 1992-5. for 2024.
Exception for highly compensated employees. If 4. The arrangement is generally provided on the same
your plan is a self-insured medical reimbursement plan terms to all your eligible employees. However, your
that favors highly compensated employees, you must in- QSEHRA may exclude employees who haven’t com-
clude all or part of the amounts you pay to these employ- pleted 90 days of service, employees who haven’t at-
ees in box 1 of Form W-2. However, you can exclude tained age 25 before the beginning of the plan year,
these amounts (other than payments for specific injuries part-time or seasonal employees, employees covered
or illnesses not made under a plan set up to benefit all em- by a collective bargaining agreement if health benefits
ployees or certain groups of employees) from the employ- were the subject of good-faith bargaining, and em-
ee's wages subject to income tax withholding and social ployees who are nonresident aliens with no earned in-
security, Medicare, and FUTA taxes. come from sources within the United States.
A self-insured plan is a plan that reimburses your em-
Eligible employer. To be an eligible employer, you
ployees for medical expenses not covered by an accident
must not be an applicable large employer, which is de-
or health insurance policy.
fined as an employer that generally employed at least 50
A highly compensated employee for this exception is
full-time employees, including full-time equivalent employ-
any of the following individuals.
ees, in the prior calendar year. You must also not offer a
• One of the five highest paid officers. group health plan (including a health reimbursement ar-
• An employee who owns (directly or indirectly) more rangement (HRA) or a health FSA) to any of your employ-
than 10% in value of the employer's stock. ees. For more information about the Affordable Care Act
and group health plan requirements, go to IRS.gov/ACA.
• An employee who is among the highest paid 25% of For more information about QSEHRAs, including informa-
all employees (other than those who can be excluded tion about the requirement to give a written notice to each
from the plan). eligible employee, see Notice 2017-67, 2017-47 I.R.B.
For more information on this exception, see section 517, available at IRS.gov/irb/2017-47_IRB#NOT-2017-67.
105(h) of the Internal Revenue Code and its regulations.
Reporting requirements. You must report in box 12
COBRA premiums. The exclusion for accident and of Form W-2 using code FF the amount of payments and
health benefits applies to amounts you pay to maintain reimbursements that your employee is entitled to receive
medical coverage for a current or former employee under from the QSEHRA for the calendar year without regard to
the Combined Omnibus Budget Reconciliation Act of the amount of payments or reimbursements actually re-
1986 (COBRA). The exclusion applies regardless of the ceived. For example, if your QSEHRA provides a permit-
length of employment, whether you directly pay the premi- ted benefit of $3,000 and your employee receives reim-
ums or reimburse the former employee for premiums paid, bursements of $2,000, on Form W-2, you would report a
and whether the employee's separation is permanent or permitted benefit of $3,000 in box 12 using code FF.
temporary.
Achievement Awards
Qualified small employer health reimbursement ar-
rangements (QSEHRAs). QSEHRAs allow eligible small
This exclusion applies to the value of any tangible per-
employers to pay or reimburse medical care expenses, in-
sonal property you give to an employee as an award for ei-
cluding health insurance premiums, of eligible employees
ther length of service or safety achievement. The

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exclusion doesn't apply to awards of cash, cash equiva- 1. The employee was a 5% owner at any time during the
lents, gift cards, gift coupons, or gift certificates (other year or the preceding year.
than arrangements granting only the right to select and re-
2. The employee received more than $150,000 in pay for
ceive tangible personal property from a limited assortment
the preceding year.
of items preselected or preapproved by you). The exclu-
sion also doesn't apply to vacations, meals, lodging, tick- You can choose to ignore test (2) if the employee wasn't
ets to theater or sporting events, stocks, bonds, other se- also in the top 20% of employees when ranked by pay for
curities, and other similar items. An achievement award the preceding year.
must meet all the following requirements. An award isn't a qualified plan award if the average cost
• It is given to an employee for length of service or of all the employee achievement awards given during the
safety achievement. tax year (that would be qualified plan awards except for
this limit) is more than $400. To figure this average cost,
• It is awarded as part of a meaningful presentation. ignore awards of nominal value.
• It is awarded under conditions and circumstances that Deduct achievement awards, up to the maximum
don't create a significant likelihood of disguised pay. amounts listed earlier, as a nonwage business expense on
your return or business schedule.
Employee. For this exclusion, treat the following individ- To determine for 2024 whether an achievement
uals as employees. ! award is a “qualified plan award” under the deduc-
• A current employee. CAUTION tion rules described under Deduction limit above,
treat any employee who received more than $150,000 in
• A former common-law employee you maintain cover-
pay for 2023 as a highly compensated employee.
age for in consideration of or based on an agreement
relating to prior service as an employee. If the cost of awards given to an employee is more than
your allowable deduction, include in the employee's wa-
• A leased employee who has provided services to you
ges the larger of the following amounts.
on a substantially full-time basis for at least a year if
the services are performed under your primary direc- • The part of the cost that is more than your allowable
tion or control. deduction (up to the value of the awards).
Exception for S corporation shareholders. Don't • The amount by which the value of the awards exceeds
treat a 2% shareholder of an S corporation as an em- your allowable deduction.
ployee of the corporation for this purpose. A 2% share- Exclude the remaining value of the awards from the em-
holder is someone who directly or indirectly owns (at any ployee's wages.
time during the year) more than 2% of the corporation's
stock or stock with more than 2% of the voting power.
Treat a 2% shareholder as you would a partner in a part- Adoption Assistance

nership for fringe benefit purposes, but don't treat the ben- An adoption assistance program is a separate written plan
efit as a reduction in distributions to the 2% shareholder. of an employer that meets all of the following require-
For more information, see Revenue Ruling 91-26, 1991-1 ments.
C.B. 184.
1. It benefits employees who qualify under rules set up
Exclusion from wages. You can generally exclude the by you, which don't favor highly compensated employ-
value of achievement awards you give to an employee ees or their dependents. To determine whether your
from the employee's wages if their cost isn't more than the plan meets this test, don't consider employees exclu-
amount you can deduct as a business expense for the ded from your plan who are covered by a collective
year. The excludable annual amount is $1,600 ($400 for bargaining agreement if there is evidence that adop-
awards that aren't “qualified plan awards”). tion assistance was a subject of good-faith bargain-
ing.
Deduction limit. Your deduction for the cost of em-
ployee achievement awards given to any one employee 2. It doesn't pay more than 5% of its payments during
during the tax year is limited to the following. the year for shareholders or owners (or their spouses
or dependents). A shareholder or owner is someone
• $400 for awards that aren't qualified plan awards. who owns (on any day of the year) more than 5% of
• $1,600 for all awards, whether or not qualified plan the stock or of the capital or profits interest of your
awards. business.
A qualified plan award is an achievement award given 3. You give reasonable notice of the plan to eligible em-
as part of an established written plan or program that ployees.
doesn't favor highly compensated employees as to eligibil-
ity or benefits. 4. Employees provide reasonable substantiation that
A highly compensated employee is an employee who payments or reimbursements are for qualifying expen-
meets either of the following tests. ses.

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For this exclusion, a highly compensated employee for letic facility that is a facility for residential use, such as ath-
2024 is an employee who meets either of the following letic facilities that are part of a resort.
tests.
Employee. For this exclusion, treat the following individ-
1. The employee was a 5% owner at any time during the uals as employees.
year or the preceding year.
• A current employee.
2. The employee received more than $150,000 in pay for
the preceding year. • A former employee who retired or left on disability.
You can choose to ignore test (2) if the employee wasn't • A surviving spouse of an individual who died while an
employee.
also in the top 20% of employees when ranked by pay for
the preceding year. • A surviving spouse of a former employee who retired
or left on disability.
You must exclude all payments or reimbursements you
make under an adoption assistance program for an em- • A leased employee who has provided services to you
ployee's qualified adoption expenses from the employee's on a substantially full-time basis for at least a year if
wages subject to federal income tax withholding. How- the services are performed under your primary direc-
ever, you can't exclude these payments from wages sub- tion or control.
ject to social security, Medicare, and FUTA taxes. • A partner who performs services for a partnership.
You must report all qualifying adoption expenses you
paid or reimbursed under your adoption assistance pro- De Minimis (Minimal) Benefits
gram for each employee for the year in box 12 of the em-
ployee's Form W-2. Report all amounts including those in You can exclude the value of a de minimis benefit you pro-
excess of the $16,810 exclusion for 2024. Use code T to vide to an employee from the employee's wages. A de
identify this amount. minimis benefit is any property or service you provide to
an employee that has so little value (taking into account
Exception for S corporation shareholders. For this how frequently you provide similar benefits to your em-
exclusion, don't treat a 2% shareholder of an S corpora- ployees) that accounting for it would be unreasonable or
tion as an employee of the corporation. A 2% shareholder administratively impracticable. Cash and cash equivalent
is someone who directly or indirectly owns (at any time fringe benefits (for example, gift certificates, gift cards,
during the year) more than 2% of the corporation's stock and the use of a charge card or credit card), no matter
or stock with more than 2% of the voting power. Treat a how little, are never excludable as a de minimis benefit.
2% shareholder as you would a partner in a partnership However, meal money and local transportation fare, if pro-
for fringe benefit purposes, but don't treat the benefit as a vided on an occasional basis and because of overtime
reduction in distributions to the 2% shareholder. For more work, may be excluded, as discussed later.
information, see Revenue Ruling 91-26, 1991-1 C.B. 184. Examples of de minimis benefits include the following.
More information. For more information on adoption • Personal use of an employer-provided cell phone pro-
benefits, see Notice 97-9, which is on page 35 of Internal vided primarily for noncompensatory business purpo-
Revenue Bulletin 1997-2 at IRS.gov/pub/irs-irbs/ ses. See Employer-Provided Cell Phones, later in this
irb97-02.pdf. Advise your employees to see the Instruc- section, for details.
tions for Form 8839.
• Occasional personal use of a company copying ma-
chine if you sufficiently control its use so that at least
Athletic Facilities 85% of its use is for business purposes.
You can exclude the value of an employee's use of an • Holiday or birthday gifts, other than cash, with a low
on-premises gym or other athletic facility you operate from fair market value (FMV). Also, flowers or fruit or similar
an employee's wages if substantially all use of the facility items provided to employees under special circum-
during the calendar year is by your employees, their spou- stances (for example, on account of illness, a family
ses, and their dependent children. For this purpose, an crisis, or outstanding performance).
employee's dependent child is a child or stepchild who is • Group-term life insurance payable on the death of an
the employee's dependent or who, if both parents are de- employee's spouse or dependent if the face amount
ceased, hasn't attained the age of 25. The exclusion isn't more than $2,000.
doesn't apply to any athletic facility if access to the facility
• Certain meals. See Meals, later in this section, for de-
is made available to the general public through the sale of
tails.
memberships, the rental of the facility, or a similar arrange-
ment. • Occasional parties or picnics for employees and their
guests.
On-premises facility. The athletic facility must be loca-
ted on premises you own or lease and must be operated • Occasional tickets for theater or sporting events.
by you. It doesn't have to be located on your business • Certain transportation fare. See Transportation (Com-
premises. However, the exclusion doesn't apply to an ath- muting) Benefits, later in this section, for details.

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Some examples of benefits that aren’t excludable as de For this exclusion, a highly compensated employee for
minimis fringe benefits are season tickets to sporting or 2024 is an employee who meets either of the following
theatrical events; the commuting use of an employer-pro- tests.
vided automobile or other vehicle more than 1 day a
1. The employee was a 5% owner at any time during the
month; membership in a private country club or athletic fa-
year or the preceding year.
cility, regardless of the frequency with which the employee
uses the facility; and use of employer-owned or -leased fa- 2. The employee received more than $150,000 in pay for
cilities (such as an apartment, hunting lodge, boat, etc.) the preceding year.
for a weekend. If a benefit provided to an employee
You can choose to ignore test (2) if the employee wasn't
doesn't qualify as de minimis (for example, the frequency
also in the top 20% of employees when ranked by pay for
exceeds a limit described earlier), then generally the en-
the preceding year.
tire benefit must be included in income.
Form W-2. Report the value of all dependent care assis-
Employee. For this exclusion, treat any recipient of a de
tance you provide to an employee under a DCAP in
minimis benefit as an employee.
box 10 of the employee's Form W-2. Include any amounts
you can't exclude from the employee's wages in boxes 1,
Dependent Care Assistance 3, and 5. Report in box 10 both the nontaxable portion of
assistance (up to $5,000) and any assistance above that
This exclusion applies to household and dependent care amount that is taxable to the employee.
services you directly or indirectly pay for or provide to an
employee under a written dependent care assistance pro- Example. Oak Co. provides a dependent care assis-
gram (DCAP) that covers only your employees. The serv- tance FSA to its employees through a cafeteria plan. In
ices must be for a qualifying person's care and must be addition, it provides occasional on-site dependent care to
provided to allow the employee to work. These require- its employees at no cost. Emily, an employee of Oak Co.,
ments are basically the same as the tests the employee had $4,500 deducted from her pay for the dependent care
would have to meet to claim the dependent care credit if FSA. In addition, Emily used the on-site dependent care
the employee paid for the services. For more information, several times. The FMV of the on-site care was $700. Emi-
see Can You Claim the Credit? in Pub. 503. ly's Form W-2 should report $5,200 of dependent care as-
sistance in box 10 ($4,500 FSA plus $700 on-site depend-
Employee. For this exclusion, treat the following individ- ent care). Boxes 1, 3, and 5 should include $200 (the
uals as employees. amount in excess of the nontaxable assistance), and ap-
• A current employee. plicable taxes should be withheld on that amount.
• A leased employee who has provided services to you
on a substantially full-time basis for at least a year if Educational Assistance

the services are performed under your primary direc- This exclusion applies to educational assistance you pro-
tion or control. vide to employees under an educational assistance pro-
• Yourself (if you’re a sole proprietor). gram. The exclusion also applies to graduate-level cour-
ses.
• A partner who performs services for a partnership.
Educational assistance means amounts you pay or in-
Exclusion from wages. You can exclude the value of cur for your employees' education expenses. These ex-
benefits you provide to an employee under a DCAP from penses generally include the cost of books, equipment,
the employee's wages if you reasonably believe that the fees, supplies, and tuition. However, these expenses don't
employee can exclude the benefits from gross income. include the cost of a course or other education involving
An employee can generally exclude from gross income sports, games, or hobbies, unless the education:
up to $5,000 ($2,500 if married filing separately) of bene-
fits received under a DCAP each year. • Has a reasonable relationship to your business, or
However, the exclusion can't be more than the smaller • Is required as part of a degree program.
of the earned income of either the employee or employ-
Education expenses don't include the cost of tools or
ee's spouse. Special rules apply to determine the earned
supplies (other than textbooks) your employee is allowed
income of a spouse who is either a student or not able to
to keep at the end of the course. Nor do they include the
care for themselves. For more information on the earned
cost of lodging, meals, or transportation. Your employee
income limit, see Pub. 503.
must be able to provide substantiation to you that the edu-
Exception for highly compensated employees. cational assistance provided was used for qualifying edu-
You can't exclude dependent care assistance from the wa- cation expenses.
ges of a highly compensated employee unless the bene-
fits provided under the program don't favor highly compen- Exclusion for employer payments of student loans.
sated employees and the program meets the Employer-provided educational assistance benefits in-
requirements described in section 129(d) of the Internal clude payments made after March 27, 2020, and before
Revenue Code. January 1, 2026, whether paid to the employee or to a
lender, of principal or interest on any qualified education

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loan incurred by the employee for education of the em- Assistance over $5,250. If you don't have an educa-
ployee. Qualified education loans are defined in chap- tional assistance plan, or you provide an employee with
ter 10 of Pub. 970. assistance exceeding $5,250, you must include the value
of these benefits as wages, unless the benefits are work-
Educational assistance program. An educational as- ing condition benefits. Working condition benefits may be
sistance program is a separate written plan that provides excluded from wages. Property or a service provided is a
educational assistance only to your employees. The pro- working condition benefit to the extent that if the employee
gram qualifies only if all of the following tests are met. paid for it, the amount paid would have been allowable as
• The program benefits employees who qualify under a business or depreciation expense. See Working Condi-
rules set up by you that don't favor highly compensa- tion Benefits, later in this section.
ted employees. To determine whether your program
meets this test, don't consider employees excluded Employee Discounts
from your program who are covered by a collective
bargaining agreement if there is evidence that educa- This exclusion applies to a price reduction you give your
tional assistance was a subject of good-faith bargain- employee on property or services you offer to customers
ing. in the ordinary course of the line of business in which the
• The program doesn't provide more than 5% of its ben- employee performs substantial services. It applies
efits during the year for shareholders or owners (or whether the property or service is provided at no charge
their spouses or dependents). A shareholder or owner (in which case only part of the discount may be excludable
is someone who owns (on any day of the year) more as a qualified employee discount) or at a reduced price. It
than 5% of the stock or of the capital or profits interest also applies if the benefit is provided through a partial or
of your business. total cash rebate.
• The program doesn't allow employees to choose to re- The benefit may be provided either directly by you or in-
ceive cash or other benefits that must be included in directly through a third party. For example, an employee of
gross income instead of educational assistance. an appliance manufacturer may receive a qualified em-
ployee discount on the manufacturer's appliances pur-
• You give reasonable notice of the program to eligible
chased at a retail store that offers the appliances for sale
employees.
to customers.
Your program can cover former employees if their employ-
ment is the reason for the coverage. Employee discounts don't apply to discounts on real
For this exclusion, a highly compensated employee for property or discounts on personal property of a kind com-
2024 is an employee who meets either of the following monly held for investment (such as stocks or bonds). They
tests. also don't include discounts on a line of business of the
employer for which the employee doesn't provide substan-
1. The employee was a 5% owner at any time during the
tial services, or discounts on property or services of a kind
year or the preceding year.
that aren't offered for sale to customers. Therefore, dis-
2. The employee received more than $150,000 in pay for counts on items sold in an employee store that aren't sold
the preceding year. to customers aren't excluded from employee income.
Also, employee discounts provided by another employer
You can choose to ignore test (2) if the employee wasn't through a reciprocal agreement aren't excluded.
also in the top 20% of employees when ranked by pay for
the preceding year. Employee. For this exclusion, treat the following individ-
uals as employees.
Employee. For this exclusion, treat the following individ-
uals as employees. • A current employee.
• A current employee. • A former employee who retired or left on disability.
• A former employee who retired, left on disability, or • A surviving spouse of an individual who died while an
was laid off. employee.
• A leased employee who has provided services to you • A surviving spouse of an employee who retired or left
on a substantially full-time basis for at least a year if on disability.
the services are performed under your primary direc- • A leased employee who has provided services to you
tion or control. on a substantially full-time basis for at least a year if
• Yourself (if you’re a sole proprietor). the services are performed under your primary direc-
tion or control.
• A partner who performs services for a partnership.
• A partner who performs services for a partnership.
Exclusion from wages. You can exclude up to $5,250 Treat discounts you provide to the spouse or dependent
of educational assistance you provide to an employee un- child of an employee as provided to the employee. For this
der an educational assistance program from the employ- fringe benefit, dependent child is a child or stepchild who
ee's wages each year. is the employee's dependent or who, if both parents are

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deceased, hasn't attained the age of 25. Treat a child of plan option, or from any disposition of stock acquired by
divorced parents as a dependent of both parents. exercising such an option.
Exclusion from wages. You can generally exclude the Additionally, federal income tax withholding isn't re-
value of an employee discount you provide an employee quired on the income resulting from a disqualifying dispo-
from the employee's wages, up to the following limits. sition of stock acquired by the exercise of an incentive
stock option or an employee stock purchase plan option,
• For a discount on services, 20% of the price you
or on income equal to the discount portion of stock ac-
charge nonemployee customers for the service.
quired by the exercise of an employee stock purchase
• For a discount on merchandise or other property, your plan option resulting from any qualifying disposition of the
gross profit percentage times the price you charge stock. The employer must report as income in box 1 of
nonemployee customers for the property. Form W-2 (a) the discount portion of stock acquired by the
Generally, determine your gross profit percentage in the exercise of an employee stock purchase plan option upon
line of business based on all property you offer to custom- a qualifying disposition of the stock, and (b) the spread
ers (including employee customers) and your experience (between the exercise price and the FMV of the stock at
during the tax year immediately before the tax year in the time of exercise) upon a disqualifying disposition of
which the discount is available. To figure your gross profit stock acquired by the exercise of an incentive stock option
percentage, subtract the total cost of the property from the or an employee stock purchase plan option.
total sales price of the property and divide the result by the An employer must report the excess of the FMV of
total sales price of the property. Employers that are in their stock received upon exercise of a nonstatutory stock op-
first year of existence may estimate their gross profit per- tion over the amount paid for the stock option on Form
centage based on its mark-up from cost or refer to an ap- W-2 in boxes 1, 3 (up to the social security wage base),
propriate industry average. If substantial changes in an and 5, and in box 12 using the code V. See Regulations
employer's business indicate at any time that it is inappro- section 1.83-7.
priate for the prior year's gross profit percentage to be
used for the current year, the employer must, within a rea- An employee who transfers their interest in nonstatu-
sonable period, redetermine the gross profit percentage tory stock options to the employee's former spouse inci-
for the remaining portion of the current year as if such por- dent to a divorce isn't required to include an amount in
tion of the year were the first year of the employer's exis- gross income upon the transfer. The former spouse, rather
tence. than the employee, is required to include an amount in
gross income when the former spouse exercises the stock
Exception for highly compensated employees.
options. See Revenue Ruling 2002-22 and Revenue Rul-
You can't exclude from the wages of a highly compensa-
ing 2004-60 for details. You can find Revenue Ruling
ted employee any part of the value of a discount that isn't
2002-22 on page 849 of Internal Revenue Bulletin
available on the same terms to one of the following
2002-19 at IRS.gov/pub/irs-irbs/irb02-19.pdf. Revenue
groups.
Ruling 2004-60, 2004-24 I.R.B. 1051, is available at
• All of your employees. IRS.gov/irb/2004-24_IRB#RR-2004-60.
• A group of employees defined under a reasonable
Employee stock options aren't subject to Railroad
classification you set up that doesn't favor highly com-
Retirement Tax. In Wisconsin Central Ltd. v. United
pensated employees.
States, 138 S. Ct. 2067, the U. S. Supreme Court ruled
For this exclusion, a highly compensated employee for that employee stock options (whether statutory or nonsta-
2024 is an employee who meets either of the following tutory) aren't “money remuneration” subject to the RRTA. If
tests. you're a railroad employer, don't withhold Tier 1 and Tier 2
1. The employee was a 5% owner at any time during the taxes on compensation from railroad employees covered
year or the preceding year. by the RRTA exercising such options. You must still with-
hold federal income tax on taxable compensation from
2. The employee received more than $150,000 in pay for railroad employees exercising their options.
the preceding year.
Section 83(i) election to defer income on equity
You can choose to ignore test (2) if the employee wasn't
grants. Under section 83(i) of the Internal Revenue
also in the top 20% of employees when ranked by pay for
Code, qualified employees who are granted stock options
the preceding year.
or restricted stock units (RSUs) and who later receive
stock upon exercise of the option or upon settlement of
Employee Stock Options the RSU (qualified stock) may elect to defer the recogni-
tion of income for up to 5 years if the corporation's stock
There are three kinds of stock options—incentive stock wasn’t readily tradable on an established securities mar-
options, employee stock purchase plan options, and non- ket during any prior calendar year, if the corporation has a
statutory (nonqualified) stock options. written plan under which not less than 80% of all U.S. em-
Wages for social security, Medicare, and FUTA taxes ployees are granted options or RSUs with the same rights
don't include remuneration resulting from the exercise of and privileges to receive qualified stock, and if certain
an incentive stock option or an employee stock purchase other requirements are met. An election under section

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83(i) applies only for federal income tax purposes. The Additional information. For additional information on
election has no effect on the application of social security, the tax treatment of employer-provided cell phones, see
Medicare, and FUTA taxes. For federal income tax purpo- Notice 2011-72, 2011-38 I.R.B. 407, available at
ses, the employer must withhold federal income tax at IRS.gov/irb/2011-38_IRB#NOT-2011-72.
37% in the tax year that the amount deferred is included in
the employee's income. If a section 83(i) election is made Group-Term Life Insurance Coverage
for an option exercise, that option will not be considered
an incentive stock option or an option granted pursuant to This exclusion applies to life insurance coverage that
an employee stock purchase plan. These rules apply to meets all the following conditions.
stock attributable to options exercised, or RSUs settled,
after December 31, 2017. For more information, see sec- • It provides a general death benefit that isn't included in
income.
tion 83(i); and Notice 2018-97, 2018-52 I.R.B. 1062, avail-
able at IRS.gov/irb/2018-52_IRB#NOT-2018-97. • You provide it to a group of employees. See The
10-employee rule, later.
Reporting requirements. For each employee, you
must report in box 12 of Form W-2 using code GG the • It provides an amount of insurance to each employee
amount included in income in the calendar year from based on a formula that prevents individual selection.
qualified equity grants under section 83(i). You must also This formula must use factors such as the employee's
report in box 12 using code HH the total amount of income age, years of service, pay, or position.
deferred under section 83(i) determined as of the close of • You provide it under a policy you directly or indirectly
the calendar year. carry. Even if you don't pay any of the policy's cost,
you’re considered to carry it if you arrange for payment
More information. For more information about em-
of its cost by your employees and charge at least one
ployee stock options, see sections 83, 421, 422, and 423
employee less than, and at least one other employee
of the Internal Revenue Code and their related regula-
more than, the cost of their insurance. Determine the
tions.
cost of the insurance, for this purpose, as explained
under Coverage over the limit, later.
Employer-Provided Cell Phones Group-term life insurance doesn't include the following
insurance.
The value of the business use of an employer-provided
cell phone, provided primarily for noncompensatory busi- • Insurance that doesn't provide general death benefits,
ness reasons, is excludable from an employee's income such as travel insurance or a policy providing only ac-
as a working condition fringe benefit. Personal use of an cidental death benefits.
employer-provided cell phone, provided primarily for non- • Life insurance on the life of your employee's spouse or
compensatory business reasons, is excludable from an dependent. However, you may be able to exclude the
employee's income as a de minimis fringe benefit. The cost of this insurance from the employee's wages as a
term “cell phone” also includes other similar telecommuni- de minimis benefit. See De Minimis (Minimal) Bene-
cations equipment. For the rules relating to these types of fits, earlier in this section.
benefits, see De Minimis (Minimal) Benefits, earlier in this
section, and Working Condition Benefits, later in this sec- • Insurance provided under a policy that provides a per-
tion. manent benefit (an economic value that extends be-
yond 1 policy year, such as paid-up or cash-surrender
Noncompensatory business purposes. You provide a value), unless certain requirements are met. See Reg-
cell phone primarily for noncompensatory business purpo- ulations section 1.79-1 for details.
ses if there are substantial business reasons for providing
the cell phone. Examples of substantial business reasons Employee. For this exclusion, treat the following individ-
include the employer's: uals as employees.
• Need to contact the employee at all times for work-re- 1. A current common-law employee.
lated emergencies, 2. A full-time life insurance agent who is a current statu-
• Requirement that the employee be available to speak tory employee.
with clients at times when the employee is away from 3. An individual who was formerly your employee under
the office, and (1) or (2).
• Need to speak with clients located in other time zones 4. A leased employee who has provided services to you
at times outside the employee's normal workday. on a substantially full-time basis for at least a year if
Cell phones provided to promote goodwill, boost the services are performed under your primary direc-
morale, or attract prospective employees. You can't tion or control.
exclude from an employee's wages the value of a cell Exception for S corporation shareholders. Don't
phone provided to promote goodwill of an employee, to at- treat a 2% shareholder of an S corporation as an em-
tract a prospective employee, or as a means of providing ployee of the corporation for this purpose. A 2%
additional compensation to an employee. shareholder is someone who directly or indirectly owns (at

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any  time  during  the  year)  more  than  2%  of  the  corpora-  To  apply  either  exception,  don't  consider  employees 
tion's  stock  or  stock  with  more  than  2%  of  the  voting  who  were  denied  insurance  for  any  of  the  following  rea-
power. Treat a 2% shareholder as you would a partner in a        sons.
partnership for fringe benefit purposes, but don't treat the       They were 65 or older.
                                                                 •
benefit  as  a  reduction  in  distributions  to  the  2%  share-
holder. For more information, see Revenue Ruling 91-26,          • They customarily work 20 hours or less a week or 5 
1991-1 C.B. 184.                                                   months or less in a calendar year.
                                                                 • They haven't been employed for the waiting period 
The  10-employee  rule.     Generally,  life  insurance  isn't 
                                                                   given in the policy. This waiting period can't be more 
group-term  life  insurance  unless  you  provide  it  at  some 
                                                                   than 6 months.
time during the calendar year to at least 10 full-time em-
ployees.                                                         Exclusion from wages.                You can generally exclude the 
For  this  rule  and  the  first  exception  discussed  next,    cost of up to $50,000 of group-term life insurance cover-
count employees who choose not to receive the insurance          age from the wages of an insured employee. You can ex-
as if they do receive insurance, unless, to receive it, they     clude the same amount from the employee's wages when 
must  contribute  to  the  cost  of  benefits  other  than  the  figuring  social  security  and  Medicare  taxes.  In  addition, 
group-term  life  insurance.  For  example,  count  an  em-      you don't have to withhold federal income tax or pay FUTA 
ployee who could receive insurance by paying part of the         tax on any group-term life insurance you provide to an em-
cost, even if that employee chooses not to receive it. How-      ployee.
ever, don't count an employee who chooses not to receive 
insurance if the employee must pay part or all of the cost        Coverage  over  the  limit.               You  must  include  in  your 
of permanent benefits in order to obtain group-term life in-     employee's  wages  the  cost  of  group-term  life  insurance 
surance.  A  permanent  benefit  is  an  economic  value  ex-    beyond  $50,000  worth  of  coverage,  reduced  by  the 
tending  beyond  1  policy  year  (for  example,  a  paid-up  or amount the employee paid toward the insurance. Report it 
cash-surrender value) that is provided under a life insur-       as  wages  in  boxes  1,  3,  and  5  of  the  employee's  Form 
ance policy.                                                     W-2. Also, show it in box 12 with code C. The amount is 
                                                                 subject  to  social  security  and  Medicare  taxes,  and  you 
Exceptions.  Even if you don't meet the 10-employee              may, at your option, withhold federal income tax.
rule,  two  exceptions  allow  you  to  treat  insurance  as      Figure the monthly cost of the insurance to include in 
group-term life insurance.                                       the employee's wages by multiplying the number of thou-
Under  the  first  exception,  you  don't  have  to  meet  the   sands  of  dollars  of  all  insurance  coverage  over  $50,000 
10-employee rule if all the following conditions are met.        (figured  to  the  nearest  $100)  by  the  cost  shown  in  Ta-
1. If evidence that the employee is insurable is required,       ble 2-2. For all coverage provided within the calendar year, 
   it is limited to a medical questionnaire (completed by        use the employee's age on the last day of the employee's 
   the employee) that doesn't require a physical.                tax year. You must prorate the cost from the table if less 
                                                                 than a full month of coverage is involved.
2. You provide the insurance to all your full-time employ-
   ees or, if the insurer requires the evidence mentioned        Table 2-2. Cost Per $1,000 of Protection for 
   in (1), to all full-time employees who provide evidence       1 Month
   the insurer accepts.
                                                                   Age                                                                    Cost
3. You figure the coverage based on either a uniform             Under 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.05
   percentage of pay or the insurer's coverage brackets          25 through 29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.06
   that meet certain requirements. See Regulations sec-          30 through 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.08
   tion 1.79-1 for details.                                      35 through 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.09
                                                                 40 through 44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.10
Under  the  second  exception,  you  don't  have  to  meet       45 through 49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.15
the  10-employee  rule  if  all  the  following  conditions  are 50 through 54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.23
met.                                                             55 through 59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.43
                                                                 60 through 64 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  0.66
•  You provide the insurance under a common plan cov-            65 through 69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1.27
   ering your employees and the employees of at least            70 and older . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.06
   one other employer who isn't related to you.
                                                                  You  figure  the  total  cost  to  include  in  the  employee's 
•  The insurance is restricted to, but mandatory for, all 
                                                                 wages by multiplying the monthly cost by the number of 
   your employees who belong to, or are represented by, 
                                                                 months' coverage at that cost.
   an organization (such as a union) that carries on sub-
   stantial activities besides obtaining insurance.               Example.          Tom's  employer  provides  Tom  with 
•  Evidence of whether an employee is insurable doesn't          group-term life insurance coverage of $200,000. Tom is 45 
   affect an employee's eligibility for insurance or the         years old, isn't a key employee, and pays $100 per year 
   amount of insurance that employee gets.                       toward the cost of the insurance. Tom's employer must in-
                                                                 clude  $170  in  Tom’s  wages.  The  $200,000  of  insurance 
                                                                 coverage  is  reduced  by  $50,000.  The  yearly  cost  of 
                                                                 $150,000 of coverage is $270 ($0.15 x 150 x 12), and is 

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reduced by the $100 Tom pays for the insurance. The em- A former employee who was a key employee upon re-
ployer includes $170 in boxes 1, 3, and 5 of Tom's Form tirement or separation from service is also a key em-
W-2. The employer also enters $170 in box 12 with code ployee.
C. Your plan doesn't favor key employees as to participa-
tion if at least one of the following is true.
Coverage for dependents. Group-term life insurance
coverage paid by the employer for the spouse or depend- • It benefits at least 70% of your employees.
ents of an employee may be excludable from income as a • At least 85% of the participating employees aren't key
de minimis fringe benefit if the face amount isn't more than employees.
$2,000. If the face amount is greater than $2,000, the de-
pendent coverage may be excludable from income as a • It benefits employees who qualify under a set of rules
de minimis fringe benefit if the excess (if any) of the cost of you set up that don't favor key employees.
insurance over the amount the employee paid for it on an Your plan meets this participation test if it is part of a
after-tax basis is so small that accounting for it is unrea- cafeteria plan (discussed earlier in section 1) and it meets
sonable or administratively impracticable. the participation test for those plans.
Former employees. When group-term life insurance When applying this test, don't consider employees
over $50,000 is provided to an employee (including retir- who:
ees) after their termination, the employee share of social • Have not completed 3 years of service;
security and Medicare taxes on that period of coverage is
• Are part time or seasonal;
paid by the former employee with their tax return and isn't
collected by the employer. You’re not required to collect • Are nonresident aliens who receive no U.S. source
those taxes. You must, however, pay the employer share earned income from you; or
of social security and Medicare taxes. Use Table 2-2 to • Aren’t included in the plan but are in a unit of employ-
determine the amount of additional income that is subject ees covered by a collective bargaining agreement, if
to social security and Medicare taxes for coverage provi- the benefits provided under the plan were the subject
ded after separation from service. Report the uncollected of good-faith bargaining between you and employee
amounts separately in box 12 of Form W-2 using codes M representatives.
and N. See the General Instructions for Forms W-2 and
W-3 and the instructions for your employment tax return. Your plan doesn't favor key employees as to benefits if
all benefits available to participating key employees are
Exception for key employees. Generally, if your also available to all other participating employees. Your
group-term life insurance plan favors key employees as to plan doesn't favor key employees just because the
participation or benefits, you must include the entire cost amount of insurance you provide to your employees is uni-
of the insurance in your key employees' wages. This ex- formly related to their pay.
ception generally doesn't apply to church plans. When fig-
uring social security and Medicare taxes, you must also in- S corporation shareholders. Because you can't
clude the entire cost in the employees' wages. Include the treat a 2% shareholder of an S corporation as an em-
cost in boxes 1, 3, and 5 of Form W-2. However, you don't ployee for this exclusion, you must include the cost of all
have to withhold federal income tax or pay FUTA tax on group-term life insurance coverage you provide the 2%
the cost of any group-term life insurance you provide to an shareholder in their wages. When figuring social security
employee. and Medicare taxes, you must also include the cost of this
For this purpose, the cost of the insurance is the coverage in the 2% shareholder's wages. Include the cost
greater of the following amounts. in boxes 1, 3, and 5 of Form W-2. However, you don't have
to withhold federal income tax or pay FUTA tax on the cost
• The premiums you pay for the employee's insurance. of any group-term life insurance coverage you provide to
See Regulations section 1.79-4T(Q&A 6) for more in- the 2% shareholder.
formation.
• The cost you figure using Table 2-2. Health Savings Accounts (HSAs)
For this exclusion, a key employee during 2024 is an
employee or former employee who is one of the following An HSA is an account owned by a qualified individual who
individuals. See section 416(i) of the Internal Revenue is generally your employee or former employee. Any con-
Code for more information. tributions that you make to an HSA become the employ-
ee's property and can't be withdrawn by you. Contribu-
1. An officer having annual pay of more than $220,000. tions to the account are used to pay current or future
medical expenses of the account owner, their spouse, and
2. An individual who for 2024 is either of the following.
any qualified dependent. The medical expenses must not
a. A 5% owner of your business. be reimbursable by insurance or other sources and their
payment from HSA funds (distribution) won't give rise to a
b. A 1% owner of your business whose annual pay is
medical expense deduction on the individual's federal in-
more than $150,000.
come tax return.

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Eligibility. A qualified individual must be covered by a Exception. The Tax Relief and Health Care Act of
High Deductible Health Plan (HDHP) and not be covered 2006 allows employers to make larger HSA contributions
by other health insurance except for permitted insurance for a nonhighly compensated employee than for a highly
listed under section 223(c)(3) or insurance for accidents, compensated employee. A highly compensated employee
disability, dental care, vision care, long-term care, or (in for 2024 is an employee who meets either of the following
the case of months beginning after March 31, 2022, and tests.
before January 1, 2023, and plan years beginning on or
1. The employee was a 5% owner at any time during the
before December 31, 2021, or after December 31, 2022,
year or the preceding year.
and before January 1, 2025) telehealth and other remote
care. For calendar year 2024, a qualifying HDHP must 2. The employee received more than $150,000 in pay for
have a deductible of at least $2,800 for self-only coverage the preceding year.
or $5,550 for family coverage and must limit annual
You can choose to ignore test (2) if the employee wasn't
out-of-pocket expenses of the beneficiary to $5,550 for
also in the top 20% of employees when ranked by pay for
self-only coverage and $10,200 for family coverage.
the preceding year.
There are no income limits that restrict an individual's
eligibility to contribute to an HSA nor is there a require- Partnerships and S corporations. Partners and 2%
ment that the account owner have earned income to make shareholders of an S corporation aren't eligible for salary
a contribution. reduction (pre-tax) contributions to an HSA. Employer
contributions to the HSA of a bona fide partner or 2%
Exceptions. An individual isn't a qualified individual if
shareholder are treated as distributions or guaranteed
they can be claimed as a dependent on another person's
tax return. Also, an employee's participation in a health payments, as determined by the facts and circumstances.
For more information, see Notice 2005-8, 2005-4 I.R.B.
FSA or HRA generally disqualifies the individual (and em-
368, available at IRS.gov/irb/2005-04_IRB#NOT-2005-8.
ployer) from making contributions to their HSA. However,
an individual may qualify to participate in an HSA if they Cafeteria plans. You may contribute to an employee's
are participating in only a limited-purpose FSA or HRA or HSA using a cafeteria plan and your contributions aren't
a post-deductible FSA. For more information, see Other subject to the statutory comparability rules. However, caf-
employee health plans in Pub. 969. eteria plan nondiscrimination rules still apply. For example,
contributions under a cafeteria plan to employee HSAs
Employer contributions. Up to specified dollar limits,
can't be greater for higher-paid employees than they are
cash contributions to the HSA of a qualified individual (de-
for lower-paid employees. Contributions that favor
termined monthly) are exempt from federal income tax
lower-paid employees aren't prohibited.
withholding, social security tax, Medicare tax, and FUTA
tax if you reasonably believe that the employee can ex- Reporting requirements. You must report your contri-
clude the benefits from gross income. For 2024, you can butions to an employee's HSA in box 12 of Form W-2 us-
contribute up to $4,150 for self-only coverage under an ing code W. The trustee or custodian of the HSA, gener-
HDHP or $8,350 for family coverage under an HDHP to a ally a bank or insurance company, reports distributions
qualified individual's HSA. from the HSA using Form 1099-SA.
The contribution amounts listed above are increased by
$1,000 for a qualified individual who is age 55 or older at More information. For more information about HSAs,
any time during the year. For two qualified individuals who see Pub. 969.
are married to each other and who are each age 55 or
older at any time during the year, each spouse's contribu-
Lodging on Your Business Premises
tion limit is increased by $1,000, provided each spouse
has a separate HSA. No contributions can be made to an You can exclude the value of lodging you furnish to an em-
individual's HSA after they become enrolled in Medicare ployee from the employee's wages if it meets the following
Part A or Part B. tests.
Nondiscrimination rules. Your contribution amount to • It is furnished on your business premises.
an employee's HSA must be comparable for all employ- • It is furnished for your convenience.
ees who have comparable coverage during the same pe-
riod. Otherwise, there will be an excise tax equal to 35% of • The employee must accept it as a condition of em-
the amount you contributed to all employees' HSAs. ployment.
For guidance on employer comparable contributions to Different tests may apply to lodging furnished by educa-
HSAs under section 4980G in instances where an em- tional institutions. See section 119(d) of the Internal Reve-
ployee hasn't established an HSA by December 31 and in nue Code for details.
instances where an employer accelerates contributions for
the calendar year for employees who have incurred quali- If you allow your employee to choose to receive addi-
fied medical expenses, see Regulations section tional pay instead of lodging, then the lodging, if chosen,
54.4980G-4. isn’t excluded. The exclusion also doesn't apply to cash
allowances for lodging.

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On your business premises. For this exclusion, your in distributions to the 2% shareholder. For more informa-
business premises is generally your employee's place of tion, see Revenue Ruling 91-26, 1991-1 C.B. 184.
work. For example, if you're a household employer, then
lodging furnished in your home to a household employee Meals
would be considered lodging furnished on your business
premises. For special rules that apply to lodging furnished This section discusses the exclusion rules that apply to de
in a camp located in a foreign country, see section 119(c) minimis meals and meals on your business premises.
of the Internal Revenue Code and its regulations.
De Minimis Meals
For your convenience. Whether or not you furnish lodg-
ing for your convenience as an employer depends on all You can exclude any occasional meal you provide to an
the facts and circumstances. You furnish the lodging to employee if it has so little value (taking into account how
your employee for your convenience if you do this for a frequently you provide meals to your employees) that ac-
substantial business reason other than to provide the em- counting for it would be unreasonable or administratively
ployee with additional pay. This is true even if a law or an impracticable. The exclusion applies, for example, to the
employment contract provides that the lodging is fur- following items.
nished as pay. However, a written statement that the lodg-
ing is furnished for your convenience isn't sufficient. • Coffee, doughnuts, or soft drinks.
• Occasional meals or meal money provided to enable
Condition of employment. Lodging meets this test if an employee to work overtime. However, the exclusion
you require your employees to accept the lodging be- doesn't apply to meal money figured on the basis of
cause they need to live on your business premises to be hours worked (for example, $2.00 per hour for each
able to properly perform their duties. Examples include hour over 8 hours), or meals or meal money provided
employees who must be available at all times and employ- on a regular or routine basis.
ees who couldn't perform their required duties without be-
ing furnished the lodging. • Occasional parties or picnics for employees and their
It doesn't matter whether you must furnish the lodging guests.
as pay under the terms of an employment contract or a
law fixing the terms of employment. Employee. For this exclusion, treat any recipient of a de
minimis meal as an employee.
Example of qualifying lodging. You employ Sam at
a construction project at a remote job site in Alaska. Due Employer-operated eating facility for employees. The
to the inaccessibility of facilities for the employees who are de minimis meals exclusion also applies to meals you pro-
working at the job site to obtain lodging and the prevailing vide at an employer-operated eating facility for employees
weather conditions, you furnish lodging to your employees if the annual revenue from the facility equals or exceeds
at the construction site in order to carry on the construc- the direct operating costs of the facility. Direct operating
tion project. You require that your employees accept the costs include the cost of food and beverages, and labor
lodging as a condition of their employment. You may ex- costs (including employment taxes) of employees whose
clude the lodging that you provide from Sam's wages. Ad- services relating to the facility are performed primarily on
ditionally, because sufficient eating facilities aren’t availa- the premises of the eating facility. Therefore, for example,
ble near your place of employment, you may also exclude the labor costs attributable to cooks and waitstaff are in-
meals you provide to Sam from his wages, as discussed in cluded in direct operating costs, but the labor cost attribut-
Proper meals not otherwise available under Meals on Your able to a manager of an eating facility whose services
Business Premises, later in this section. aren't primarily performed on the premises of the eating
facility aren't included in direct operating costs.
Example of nonqualifying lodging. A hospital gives For this purpose, your revenue from providing a meal is
Joan, an employee of the hospital, the choice of living at considered equal to the facility's direct operating costs to
the hospital free of charge or living elsewhere and receiv- provide that meal if its value can be excluded from an em-
ing a cash allowance in addition to Joan’s regular salary. If ployee's wages, as explained under Meals on Your Busi-
Joan chooses to live at the hospital, the hospital can't ex- ness Premises, later. If you provide free or discounted
clude the value of the lodging from her wages because meals to volunteers at a hospital and you can reasonably
she isn't required to live at the hospital to properly perform determine the number of meals you provide, then you may
the duties of her employment. disregard these costs and revenues. If you charge nonem-
ployees a greater amount than employees, then you must
S corporation shareholders. For this exclusion, don't disregard all costs and revenues attributable to these non-
treat a 2% shareholder of an S corporation as an em- employees.
ployee of the corporation. A 2% shareholder is someone An employer-operated eating facility for employees is
who directly or indirectly owns (at any time during the an eating facility that meets all the following conditions.
year) more than 2% of the corporation's stock or stock
• You own or lease the facility.
with more than 2% of the voting power. Treat a 2% share-
holder as you would a partner in a partnership for fringe
benefit purposes, but don't treat the benefit as a reduction

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• You operate the facility. You’re considered to operate • They are furnished for your convenience.
the eating facility if you have a contract with another to
operate it. If you allow your employee to choose to receive addi-
tional pay instead of meals, then the meals, if chosen,
• The facility is on or near your business premises.
aren’t excluded. The exclusion also doesn't apply to cash
• You provide meals (food, drinks, and related services) allowances for meals.
at the facility during, or immediately before or after, the
employee's workday. On your business premises. Generally, for this exclu-
sion, the employee's place of work is your business prem-
Exclusion from wages. You can generally exclude the ises.
value of de minimis meals you provide to an employee
from the employee's wages. For your convenience. Whether you furnish meals for
your convenience as an employer depends on all the facts
Exception for highly compensated employees. and circumstances. You furnish the meals to your em-
You can't exclude from the wages of a highly compensa- ployee for your convenience if you do this for a substantial
ted employee the value of a meal provided at an em- business reason other than to provide the employee with
ployer-operated eating facility that isn't available on the additional pay. This is true even if a law or an employment
same terms to one of the following groups. contract provides that the meals are furnished as pay.
• All of your employees. However, a written statement that the meals are furnished
for your convenience isn't sufficient.
• A group of employees defined under a reasonable
classification you set up that doesn't favor highly com- Meals excluded for all employees if excluded for
pensated employees. more than half. If more than half of your employees who
are furnished meals on your business premises are fur-
For this exclusion, a highly compensated employee for
nished the meals for your convenience, you can treat all
2024 is an employee who meets either of the following
meals you furnish to employees on your business prem-
tests.
ises as furnished for your convenience.
1. The employee was a 5% owner at any time during the
Food service employees. Meals you furnish to a res-
year or the preceding year.
taurant or other food service employee during, or immedi-
2. The employee received more than $150,000 in pay for ately before or after, the employee's working hours are fur-
the preceding year. nished for your convenience. For example, if a waitstaff
works during the breakfast and lunch periods, you can ex-
You can choose to ignore test (2) if the employee wasn't
clude from their wages the value of the breakfast and
also in the top 20% of employees when ranked by pay for
lunch you furnish in your restaurant for each day they
the preceding year.
work.
Section 13304 of P.L. 115-97 changed the rules
TIP for the deduction of food or beverage expenses Example. You operate a restaurant business. You fur-
that are excludable from employee income as a nish your employee, Carol, who is a server working 7 a.m.
de minimis fringe benefit. For amounts incurred or paid af- to 4 p.m., two meals during each workday. You encourage
ter 2017, the 50% limit on deductions for food or beverage but don't require Carol to have breakfast on the business
expenses also applies to food or beverage expenses ex- premises before starting work. Carol must have lunch on
cludable from employee income as a de minimis fringe the premises. Because Carol is a food service employee
benefit. However, food or beverage expenses related to and works during the normal breakfast and lunch periods,
employee recreation, such as holiday parties or annual you can exclude from her wages the value of her breakfast
picnics, aren't subject to the 50% limit on deductions when and lunch.
made primarily for the benefit of your employees other If you also allow Carol to have meals on your business
than employees who are officers, shareholders or other premises without charge on Carol’s days off, you can't ex-
owners who own a 10% or greater interest in your busi- clude the value of those meals from Carol’s wages.
ness, or other highly compensated employees. For more Employees available for emergency calls. Meals
information, see Regulations section 1.274-12. While your you furnish during working hours so an employee will be
business deduction may be limited, the fringe benefit ex- available for emergency calls during the meal period are
clusion rules still apply and the de minimis fringe benefits furnished for your convenience. You must be able to show
may be excluded from your employee's wages, as dis- these emergency calls have occurred or can reasonably
cussed earlier. be expected to occur, and that the calls have resulted, or
will result, in you calling on your employees to perform
Meals on Your Business Premises their jobs during their meal period.

Example. A hospital maintains a cafeteria on its prem-
You can exclude the value of meals you furnish to an em-
ises where all of its 230 employees may get meals at no
ployee from the employee's wages if they meet the follow-
charge during their working hours. The hospital must have
ing tests.
120 of its employees available for emergencies. Each of
• They are furnished on your business premises. these 120 employees is, at times, called upon to perform

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services during the meal period. Although the hospital Meals with a charge. The fact that you charge for the
doesn't require these employees to remain on the prem- meals and that your employees may accept or decline the
ises, they rarely leave the hospital during their meal pe- meals isn't taken into account in determining whether or
riod. Since the hospital furnishes meals on its premises to not meals are furnished for your convenience.
its employees so that more than half of them are available
for emergency calls during meal periods, the hospital can S corporation shareholders. For this exclusion, don't
exclude the value of these meals from the wages of all of treat a 2% shareholder of an S corporation as an em-
its employees. ployee of the corporation. A 2% shareholder is someone
who directly or indirectly owns (at any time during the
Short meal periods. Meals you furnish during work- year) more than 2% of the corporation's stock or stock
ing hours are furnished for your convenience if the nature with more than 2% of the voting power. Treat a 2% share-
of your business (not merely a preference) restricts an em- holder as you would a partner in a partnership for fringe
ployee to a short meal period (such as 30 or 45 minutes) benefit purposes, but don't treat the benefit as a reduction
and the employee can't be expected to eat elsewhere in in distributions to the 2% shareholder. For more informa-
such a short time. For example, meals can qualify for this tion, see Revenue Ruling 91-26, 1991-1 C.B. 184.
treatment if your peak workload occurs during the normal
lunch hour. However, they don't qualify if the reason for the
short meal period is to allow the employee to leave earlier No-Additional-Cost Services

in the day. This exclusion applies to a service you provide to an em-
Example. Frank is a bank teller who works from 9 ployee if it doesn't cause you to incur any substantial addi-
a.m. to 5 p.m. The bank furnishes Frank’s lunch without tional costs. The service must be offered to customers in
charge in a cafeteria the bank maintains on its premises. the ordinary course of the line of business in which the
The bank furnishes these meals to Frank to limit his lunch employee performs substantial services.
period to 30 minutes, because the bank's peak workload No-additional-cost services are excess capacity serv-
occurs during the normal lunch period. If Frank got lunch ices, such as airline, bus, or train tickets; hotel rooms; or
elsewhere, it would take him much longer than 30 minutes telephone services provided free, at a reduced price, or
and the bank strictly enforces the time limit. The bank can through a cash rebate to employees working in those lines
exclude the value of these meals from Frank's wages. of business. Services that aren't eligible for treatment as
Proper meals not otherwise available. Meals you no-additional-cost services are non-excess capacity serv-
furnish during working hours are furnished for your con- ices, such as the facilitation by a stock brokerage firm of
venience if the employee couldn't otherwise get proper the purchase of stock by employees. These services may,
meals within a reasonable period of time. For example, however, be eligible for a qualified employee discount of
meals can qualify for this treatment if there are insufficient up to 20% of the value of the service provided. See Em-
eating facilities near the place of employment. For an ex- ployee Discounts, earlier.

ample of this, see Example of qualifying lodging, earlier in Substantial additional costs. To determine whether
this section. you incur substantial additional costs to provide a service
Meals after work hours. Generally, meals furnished to an employee, count any lost revenue as a cost. Don't
before or after the working hours of an employee aren’t reduce the costs you incur by any amount the employee
considered as furnished for your convenience. However, pays for the service. You’re considered to incur substantial
meals you furnish to an employee immediately after work- additional costs if you or your employees spend a sub-
ing hours are furnished for your convenience if you would stantial amount of time in providing the service, even if the
have furnished them during working hours for a substan- time spent would otherwise be idle or if the services are
tial nonpay business reason but, because of the work du- provided outside normal business hours.
ties, they weren't obtained during working hours.
Example. A commercial airline allows its employees
Meals you furnish to promote goodwill, boost mo- to take personal flights on the airline at no charge and re-
rale, or attract prospective employees. Meals you fur- ceive reserved seating. Because the employer gives up
nish to promote goodwill, boost morale, or attract prospec- potential revenue by allowing the employees to reserve
tive employees aren't considered furnished for your seats, employees receiving such free flights aren’t eligible
convenience. However, you may be able to exclude their for the no-additional-cost exclusion.
value, as discussed under De Minimis Meals, earlier.
Reciprocal agreements. A no-additional-cost service
Meals furnished on nonworkdays or with lodging. provided to your employee by an unrelated employer may
You generally can't exclude from an employee's wages the qualify as a no-additional-cost service if all the following
value of meals you furnish on a day when the employee tests are met.
isn't working. However, you can exclude these meals if
they are furnished with lodging that is excluded from the • The service is the same type of service generally pro-
employee's wages. See Lodging on Your Business Prem- vided to customers in both the line of business in
ises, earlier in this section. which the employee works and the line of business in
which the service is provided.

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• You and the employer providing the service have a You can choose to ignore test (2) if the employee wasn't
written reciprocal agreement under which a group of also in the top 20% of employees when ranked by pay for
employees of each employer, all of whom perform the preceding year.
substantial services in the same line of business, may
receive no-additional-cost services from the other em- Retirement Planning Services
ployer.
• Neither you nor the other employer incurs any sub- You may exclude from an employee's wages the value of
stantial additional cost (including lost revenue) either any retirement planning advice or information you provide
in providing the service or because of the written to your employee or their spouse if you maintain a quali-
agreement. fied retirement plan. A qualified retirement plan includes a
plan, contract, pension, or account described in section
Employee. For this exclusion, treat the following individ- 219(g)(5) of the Internal Revenue Code. In addition to em-
uals as employees. ployer plan advice and information, the services provided
may include general advice and information on retirement.
1. A current employee.
However, the exclusion doesn't apply to services for tax
2. A former employee who retired or left on disability. preparation, accounting, legal, or brokerage services. You
can't exclude from the wages of a highly compensated
3. A surviving spouse of an individual who died while an
employee retirement planning services that aren't availa-
employee.
ble on the same terms to each member of a group of em-
4. A surviving spouse of a former employee who retired ployees normally provided education and information
or left on disability. about the employer's qualified retirement plan.
5. A leased employee who has provided services to you
on a substantially full-time basis for at least a year if Transportation (Commuting) Benefits
the services are performed under your primary direc-
tion or control. This section discusses exclusion rules that apply to bene-
fits you provide to your employees for their personal trans-
6. A partner who performs services for a partnership. portation, such as commuting to and from work. These
rules apply to the following transportation benefits.
Treat services you provide to the spouse or dependent
child of an employee as provided to the employee. For this • De minimis transportation benefits.
fringe benefit, dependent child is a child or stepchild who
• Qualified transportation benefits.
is the employee's dependent or who, if both parents are
deceased, hasn't attained the age of 25. Treat a child of Special rules that apply to demonstrator cars and qualified
divorced parents as a dependent of both parents. nonpersonal use vehicles are discussed under Working
Treat any use of air transportation by the parent of an Condition Benefits, later in this section.
employee as use by the employee. This rule doesn't apply
to use by the parent of a person considered an employee De Minimis Transportation Benefits
because of item (3) or (4) above.
You can exclude the value of any de minimis transporta-
Exclusion from wages. You can generally exclude the tion benefit you provide to an employee from the employ-
value of a no-additional-cost service you provide to an ee's wages. A de minimis transportation benefit is any lo-
employee from the employee's wages. cal transportation benefit you provide to an employee if it
has so little value (taking into account how frequently you
Exception for highly compensated employees.
provide transportation to your employees) that accounting
You can't exclude from the wages of a highly compensa-
for it would be unreasonable or administratively impracti-
ted employee the value of a no-additional-cost service
cable. For example, it applies to occasional local transpor-
that isn't available on the same terms to one of the follow-
tation fare you give an employee because the employee is
ing groups.
working overtime if the benefit is reasonable and isn't
• All of your employees. based on hours worked. Local transportation fare provided
• A group of employees defined under a reasonable on a regular or routine basis doesn't qualify for this exclu-
classification you set up that doesn't favor highly com- sion.
pensated employees.
A special rule allows you to exclude as a de minimis
For this exclusion, a highly compensated employee for benefit public transit passes, tokens, or fare cards you pro-
2024 is an employee who meets either of the following vide at a discount to defray your employee's commuting
tests. costs on the public transit system if the discount doesn't
1. The employee was a 5% owner at any time during the exceed $21 in any month. Similarly, you may also provide
year or the preceding year. a voucher or similar instrument that is exchangeable
solely for tokens, fare cards, or other instruments that ena-
2. The employee received more than $150,000 in pay for ble your employee to use the public transit system if the
the preceding year. value of the vouchers and other instruments in any month
doesn't exceed $21. You may also reimburse your

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employee to cover the cost of commuting on a public place with employees occupying at least one-half the vehi-
transit system, provided your employee doesn't receive cle's seats (not including the driver's).
more than $21 in reimbursements for commuting costs in
any month. The reimbursement must be made under a Transit pass. A transit pass is any pass, token, farecard,
bona fide reimbursement arrangement, where you estab- voucher, or similar item entitling a person to ride, free of
lish appropriate procedures for verifying on a periodic ba- charge or at a reduced rate, on one of the following.
sis that your employee's use of public transportation for • Mass transit.
commuting is consistent with the value of the benefit provi-
ded. The exclusion doesn't apply to the provision of any • In a vehicle that seats at least 6 adults (not including
benefit to defray public transit expenses incurred for per- the driver) if a person in the business of transporting
sonal travel other than commuting. persons for pay or hire operates it.
Mass transit may be publicly or privately operated and in-
Employee. For this exclusion, treat any recipient of a de cludes bus, rail, or ferry. For guidance on the use of smart
minimis transportation benefit as an employee. cards and debit cards to provide qualified transportation
fringes, see Revenue Ruling 2014-32, 2014-50 I.R.B. 917,
Qualified Transportation Benefits available at IRS.gov/irb/2014-50_IRB#RR-2014-32.

This exclusion applies to the following benefits. Qualified parking. Qualified parking is parking you pro-
vide to your employees on or near your business prem-
• A ride in a commuter highway vehicle between the
ises. It includes parking on or near the location from which
employee's home and work place.
your employees commute to work using mass transit,
• A transit pass. commuter highway vehicles, or carpools. It doesn't include
• Qualified parking. parking at or near your employee's home.
Qualified bicycle commuting reimbursement
You may provide an employee with any one or more of ! suspended. Section 11047 of P.L. 115-97 sus-
these benefits at the same time. CAUTION pends the exclusion of qualified bicycle commut-
ing reimbursements from your employee's income for any
Qualified transportation benefits can be provided di- tax year beginning after 2017 and before 2026.
rectly by you or through a bona fide reimbursement ar-
rangement. A bona fide reimbursement arrangement re-
Employee. For this exclusion, treat the following individ-
quires that the employee incur and substantiate expenses
uals as employees.
for qualified transportation benefits before reimbursement.
However, cash reimbursements for transit passes qualify • A current employee.
only if a voucher or a similar item that the employee can • A leased employee who has provided services to you
exchange only for a transit pass isn't readily available for on a substantially full-time basis for at least a year if
direct distribution by you to your employee. A voucher is the services are performed under your primary direc-
readily available for direct distribution only if an employer tion or control.
can obtain it from a voucher provider that doesn't impose
fare media charges or other restrictions that effectively A self-employed individual isn't an employee for quali-
prevent the employer from obtaining vouchers. See Regu- fied transportation benefit purposes.
lations section 1.132-9(b)(Q&A 16–19) for more informa-
tion. Exception for S corporation shareholders. Don't
treat a 2% shareholder of an S corporation as an em-
Compensation reduction agreements. A compensa- ployee of the corporation for this purpose. A 2% share-
tion reduction agreement is a way to provide qualified holder is someone who directly or indirectly owns (at any
transportation benefits on a pre-tax basis by offering your time during the year) more than 2% of the corporation's
employees a choice between cash compensation and any stock or stock with more than 2% of the voting power.
qualified transportation benefit. A compensation reduction Treat a 2% shareholder as you would a partner in a part-
arrangement can be used with a bona fide reimbursement nership for fringe benefit purposes, but don't treat the ben-
arrangement. For each month, the amount of the compen- efit as a reduction in distributions to the 2% shareholder.
sation reduction can't exceed the monthly limits for trans- For more information, see Revenue Ruling 91-26, 1991-1
portation benefits described under Exclusion from wages, C.B. 184.
later. For more information about providing qualified trans-
portation fringe benefits under a compensation reduction Relation to other fringe benefits. You can't exclude a
agreement, see Regulations section 1.132-9(b)(Q&A 11– qualified transportation benefit you provide to an em-
15). ployee under the de minimis or working condition benefit
rules. However, if you provide a local transportation benefit
Commuter highway vehicle. A commuter highway vehi- other than by transit pass or commuter highway vehicle, or
cle is any highway vehicle that seats at least 6 adults (not to a person other than an employee, you may be able to
including the driver). In addition, you must reasonably ex- exclude all or part of the benefit under other fringe benefit
pect that at least 80% of the vehicle mileage will be for rules (de minimis, working condition, etc.).
transporting employees between their homes and work-

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Exclusion from wages. You can generally exclude the 4. A surviving spouse of a former employee who retired
value of transportation benefits that you provide to an em- or left on disability.
ployee during 2024 from the employee's wages up to the
5. A dependent child or spouse of any individual listed in
following limits.
(1) through (4) above.
• $315 per month for combined commuter highway ve-
hicle transportation and transit passes. A tuition reduction for graduate education qualifies for
this exclusion only if it is for the education of a graduate
• $315 per month for qualified parking. student who performs teaching or research activities for
Benefits more than the limit. If the value of a benefit the educational organization.

for any month is more than its limit, include in the employ- For more information on this exclusion, see Qualified
ee's wages the amount over the limit minus any amount Tuition Reduction under Other Types of Educational Assis-
the employee paid for the benefit. You can't exclude the tance in chapter 1 of Pub. 970.
excess from the employee's wages as a de minimis trans-
portation benefit.
Working Condition Benefits
Qualified transportation benefits aren’t de-
TIP ductible. Sections 274(a)(4) and 274(l) provide This exclusion applies to property and services you pro-
that no deduction is allowed for qualified transpor- vide to an employee so that the employee can perform
tation benefits (whether provided directly by you, through their job. It applies to the extent the cost of the property or
a bona fide reimbursement arrangement, or through a services would be allowable as a business expense or de-
compensation reduction agreement) incurred or paid after preciation expense deduction to the employee if they had
2017. Also, no deduction is allowed for any expense incur- paid for it. The employee must meet any substantiation re-
red for providing any transportation, or any payment or re- quirements that apply to the deduction. Examples of work-
imbursement to your employee, in connection with travel ing condition benefits include an employee's use of a
between your employee's residence and place of employ- company car for business, an employer-provided cell
ment, except as necessary for ensuring the safety of your phone provided primarily for noncompensatory business
employee or for qualified bicycle commuting reimburse- purposes (discussed earlier), and job-related education
ments, as described in section 132(f)(5)(F) (even though provided to an employee.
the exclusion for qualified bicycle commuting reimburse-
ments is suspended, as discussed earlier). While you may This exclusion also applies to a cash payment you pro-
no longer deduct payments for qualified transportation vide for an employee's expenses for a specific or prear-
benefits, the fringe benefit exclusion rules still apply and ranged business activity if such expenses would other-
the payments may be excluded from your employee's wa- wise be allowable as a business expense or depreciation
ges, as discussed earlier. Although the value of a qualified expense deduction to the employee. You must require the
transportation fringe benefit is relevant in determining the employee to verify that the payment is actually used for
fringe benefit exclusion and whether the section 274(e)(2) those expenses and to return any unused part of the pay-
exception for expenses treated as compensation applies, ment.
the deduction that is disallowed relates to the expense of
providing a qualified transportation fringe, not its value. The exclusion doesn't apply to the following items.
For more information, see Regulations sections 1.274-13 • A service or property provided under a flexible spend-
and 1.274-14. ing account in which you agree to provide the em-
ployee, over a time period, a certain level of unspeci-
More information. For more information on qualified fied noncash benefits with a predetermined cash
transportation benefits, including van pools, and how to value.
determine the value of parking, see Regulations section
1.132-9. • A physical examination program you provide, even if
mandatory.
Tuition Reduction • Any item to the extent the payment would be allowable
as a deduction to the employee as an expense for a
An educational organization can exclude the value of a trade or business other than your trade or business.
qualified tuition reduction it provides to an employee from For more information, see Regulations section
the employee's wages. 1.132-5(a)(2).

A tuition reduction for undergraduate education gener- Employee. For this exclusion, treat the following individ-
ally qualifies for this exclusion if it is for the education of uals as employees.
one of the following individuals. • A current employee.
1. A current employee. • A partner who performs services for a partnership.
2. A former employee who retired or left on disability. • A director of your company.
3. A surviving spouse of an individual who died while an • An independent contractor who performs services for
employee. you.

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Vehicle allocation rules. If you provide a car for an em- be authorized by the employer, and must be related to
ployee's use, the amount you can exclude as a working law-enforcement functions, such as being able to re-
condition benefit is the amount that would be allowable as port directly from home to an emergency situation.
a deductible business expense if the employee paid for its Use of an unmarked vehicle for vacation or recreation
use. If the employee uses the car for both business and trips can't qualify as an authorized use.
personal use, the value of the working condition benefit is
• An ambulance or hearse used for its specific purpose.
the part determined to be for business use of the vehicle.
See Business use of your car next. Also, see the special • Any vehicle designed to carry cargo with a loaded
rules for certain demonstrator cars and qualified nonper- gross vehicle weight over 14,000 pounds.
sonal use vehicles discussed later. • Delivery trucks with seating for the driver only, or the
driver plus a folding jump seat.
Business use of your car. If you use your car exclu-
sively in your business, you can deduct car expenses. If • A passenger bus with a capacity of at least 20 pas-
you use your car for both business and personal purpo- sengers used for its specific purpose and school
ses, you must divide your expenses based on actual mile- buses. The working condition benefit is available only
age. Generally, commuting expenses between your home for the driver, not for any passengers.
and your business location, within the area of your tax Tractors and other special-purpose farm vehicles.
•
home, are not deductible.
You can deduct actual car expenses, which include de- • Bucket trucks, cement mixers, combines, cranes and
preciation (or lease payments), gas and oil, tires, repairs, derricks, dump trucks (including garbage trucks), flat-
tune-ups, insurance, and registration fees. Or, instead of bed trucks, forklifts, qualified moving vans, qualified
figuring the business part of these actual expenses, you specialized utility repair trucks, and refrigerated trucks.
may be able to use the standard mileage rate to figure See Regulations section 1.274-5(k) for the definition of
your deduction. To find the standard mileage rate for qualified moving van and qualified specialized utility repair
2024, go to IRS.gov/Tax-Professionals/ Standard-Mileage- truck.
Rates.
If you are self-employed, you can also deduct the busi- Pickup trucks. A pickup truck with a loaded gross ve-
ness part of interest on your car loan, state and local per- hicle weight of 14,000 pounds or less is a qualified non-
sonal property tax on the car, parking fees, and tolls, personal use vehicle if it has been specially modified so it
whether or not you claim the standard mileage rate. isn't likely to be used more than minimally for personal
For more information on car expenses and the rules for purposes. For example, a pickup truck qualifies if it is
using the standard mileage rate, see Pub. 463. clearly marked with permanently affixed decals, special
painting, or other advertising associated with your trade,
Demonstrator cars. Generally, all of the use of a demon- business, or function and meets either of the following re-
strator car by your full-time auto salesperson in the sales quirements.
area in which your sales office is located qualifies as a
1. It is equipped with at least one of the following items.
working condition benefit if the use is primarily to facilitate
the services the salesperson provides for you and there a. A hydraulic lift gate.
are substantial restrictions on personal use. For more in-
b. Permanent tanks or drums.
formation and the definition of “full-time auto salesperson,”
see Regulations section 1.132-5(o). For optional, simpli- c. Permanent side boards or panels that materially
fied methods used to determine if full, partial, or no exclu- raise the level of the sides of the truck bed.
sion of income to the employee for personal use of a dem-
d. Other heavy equipment (such as an electric gen-
onstrator car applies, see Revenue Procedure 2001-56.
erator, welder, boom, or crane used to tow auto-
You can find Revenue Procedure 2001-56 on page 590 of
mobiles and other vehicles).
Internal Revenue Bulletin 2001-51 at
IRS.gov/pub/irs-irbs/irb01-51.pdf. 2. It is used primarily to transport a particular type of
load (other than over the public highways) in a con-
Qualified nonpersonal use vehicles. All of an employ- struction, manufacturing, processing, farming, mining,
ee's use of a qualified nonpersonal use vehicle is a work- drilling, timbering, or other similar operation for which
ing condition benefit. A qualified nonpersonal use vehicle it was specially designed or significantly modified.
is any vehicle the employee isn't likely to use more than
minimally for personal purposes because of its design. Vans. A van with a loaded gross vehicle weight of
Qualified nonpersonal use vehicles generally include all of 14,000 pounds or less is a qualified nonpersonal use vehi-
the following vehicles. cle if it has been specially modified so it isn't likely to be
used more than minimally for personal purposes. For ex-
• Clearly marked, through painted insignia or words, po- ample, a van qualifies if it is clearly marked with perma-
lice, fire, and public safety vehicles, provided that any nently affixed decals, special painting, or other advertising
personal use of the vehicle (other than commuting) is associated with your trade, business, or function and has
prohibited by the governmental unit. a seat for the driver only (or the driver and one other per-
• Unmarked vehicles used by law enforcement officers if son) and either of the following items.
the use is officially authorized. Any personal use must • Permanent shelving that fills most of the cargo area.

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• An open cargo area and the van always carries mer- carried out adequately in your office or in laboratory
chandise, material, or equipment used in your trade, testing facilities.
business, or function.
• You provide the product to your employee for purpo-
Education. Certain job-related education you provide to ses of testing and evaluation.
an employee may qualify for exclusion as a working condi- • You provide the product to your employee for no lon-
tion benefit. To qualify, the education must meet the same ger than necessary to test and evaluate its perform-
requirements that would apply for determining whether the ance, and (to the extent not finished) the product must
employee could deduct the expenses had the employee be returned to you at completion of the testing and
paid the expenses. Degree programs as a whole don't evaluation period.
necessarily qualify as a working condition benefit. Each
course in the program must be evaluated individually for • You impose limitations on your employee’s use of the
product that significantly reduce the value of any per-
qualification as a working condition benefit. The education
sonal benefit to your employee. This includes limiting
must meet at least one of the following tests.
your employee’s ability to select among different mod-
• The education is required by the employer or by law els or varieties of the consumer product, and prohibit-
for the employee to keep their present salary, status, ing the use of the product by persons other than your
or job. The required education must serve a bona fide employee.
business purpose of the employer.
• Your employee submits detailed reports to you on the
• The education maintains or improves skills needed in testing and evaluation.
the job.
The program won’t qualify if you don’t use and examine
However, even if the education meets one or both of the results of the detailed reports submitted by employees
the above tests, it isn't qualifying education if it: within a reasonable period of time after expiration of the
• Is needed to meet the minimum educational require- testing period. Additionally, existence of one or more of
ments of the employee's present trade or business, or the following factors may also establish that the program
isn’t a bona fide product-testing program.
• Is part of a program of study that will qualify the em-
ployee for a new trade or business. • The program is in essence a leasing program under
which employees lease the consumer goods from you
Outplacement services. An employee's use of out- for a fee.
placement services qualifies as a working condition bene- • The nature of the product and other considerations
fit if you provide the services to the employee on the basis are insufficient to justify the testing program.
of need, you get a substantial business benefit from the
services distinct from the benefit you would get from the • The expense of the program outweighs the benefits to
payment of additional wages, and the employee is seek- be gained from testing and evaluation.
ing new employment in the same kind of trade or business The program must also not be limited to only certain
in which the employee is presently working. Substantial classes of employees (such as highly compensated em-
business benefits include promoting a positive business ployees), unless you can show a business reason for pro-
image, maintaining employee morale, and avoiding viding the products only to specific employees. For exam-
wrongful termination suits. ple, an automobile manufacturer may limit providing
Outplacement services don't qualify as a working con- automobiles for testing and evaluation to only their design
dition benefit if the employee can choose to receive cash engineers and supervisory mechanics, as they can prop-
or taxable benefits in place of the services. If you maintain erly evaluate the automobiles.
a severance plan and permit employees to get outplace-
ment services with reduced severance pay, include in the Exclusion from wages. You can generally exclude the
employee's wages the difference between the unreduced value of a working condition benefit you provide to an em-
severance and the reduced severance payments. ployee from the employee's wages.
Product testing. The FMV of the use of consumer Exception for independent contractors who per-
goods, which are manufactured for sale to nonemployees, form services for you. You can't exclude the use of
for product testing and evaluation by your employee out- consumer goods you provide in a product-testing program
side your workplace, qualifies as a working condition ben- from the compensation you pay to an independent con-
efit if all of the following conditions are met. tractor. You can't exclude the value of parking as a working
condition benefit, but you may be able to exclude it as a
• Consumer testing and evaluation of the product is an de minimis fringe benefit. Transit passes provided to inde-
ordinary and necessary business expense for you. pendent contractors may be excluded as a working condi-
• Business reasons necessitate that the testing and tion benefit if they meet the requirements of a working
evaluation must be performed off your business prem- condition benefit described earlier. However, personal
ises. For example, the testing and evaluation can't be commuting expenses aren’t deductible as a business ex-
pense. Transit passes may also be excluded as a de mini-
mis fringe benefit. For more information on de minimis

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transportation benefits, see De Minimis Transportation Don't determine the FMV by multiplying a
Benefits, earlier in this section. cents-per-mile rate times the number of miles driven un-
less the employee can prove the vehicle could have been
Exception for company directors. You can't exclude
leased on a cents-per-mile basis.
the value of the use of consumer goods you provide in a
product-testing program from the compensation you pay
to a director. Cents-Per-Mile Rule

Under this rule, you determine the value of a vehicle you
provide to an employee for personal use by multiplying the
3. Fringe Benefit Valuation standard mileage rate by the total miles the employee
drives the vehicle for personal purposes. Personal use is
Rules any use of the vehicle other than use in your trade or busi-
ness. This amount must be included in the employee's
This section discusses the rules you must use to deter- wages or reimbursed by the employee. For 2024, the
mine the value of a fringe benefit you provide to an em- standard mileage rate is 67 cents per mile.
ployee. You must determine the value of any benefit you
can't exclude under the rules in section 2 or for which the You can use the cents-per-mile rule if either of the fol-
amount you can exclude is limited. See Including taxable lowing requirements is met.
benefits in pay in section 1. • You reasonably expect the vehicle to be regularly used
In most cases, you must use the general valuation rule in your trade or business throughout the calendar year
to value a fringe benefit. However, you may be able to use (or for a shorter period during which you own or lease
a special valuation rule to determine the value of certain it).
benefits. • The vehicle meets the mileage test.
This section doesn't discuss the special valuation rule Maximum automobile value. You can't use the
used to value meals provided at an employer-operated ! cents-per-mile rule for an automobile (including a
eating facility for employees. For that rule, see Regulations CAUTION truck or van) if its value when you first make it
section 1.61-21(j). This section also doesn't discuss the available to any employee for personal use in calendar
special valuation rules used to value the use of aircraft. year 2024 is more than $62,000. For guidance related to
For those rules, see Regulations sections 1.61-21(g) and the impact of P.L. 115-97 on this rule, see Treasury Deci-
(h). The aircraft fringe benefit valuation formulas are pub- sion 9893, 2020-09 I.R.B. 449, available at IRS.gov/irb/
lished in the Internal Revenue Bulletin as Revenue Rulings 2020-09_IRB#TD-9893. If you and the employee own or
twice during the year. The formula applicable for the first lease the automobile together, see Regulations sections
half of the year is usually available at the end of March. 1.61-21(e)(1)(iii)(B) and (C).
The formula applicable for the second half of the year is
usually available at the end of September. Vehicle. For the cents-per-mile rule, a vehicle is any mo-
torized wheeled vehicle, including an automobile, manu-
General Valuation Rule factured primarily for use on public streets, roads, and
highways.
You must use the general valuation rule to determine the
value of most fringe benefits. Under this rule, the value of Regular use in your trade or business. Whether a ve-
a fringe benefit is its FMV. hicle is regularly used in your trade or business is deter-
mined on the basis of all facts and circumstances. A vehi-
FMV. The FMV of a fringe benefit is the amount an em- cle is considered regularly used in your trade or business
ployee would have to pay a third party in an arm's-length if one of the following safe harbor conditions is met.
transaction to buy or lease the benefit. Determine this
amount on the basis of all the facts and circumstances. • At least 50% of the vehicle's total annual mileage is for
Neither the amount the employee considers to be the your trade or business.
value of the fringe benefit nor the cost you incur to provide • You sponsor a commuting pool that generally uses the
the benefit determines its FMV. vehicle each workday to drive at least three employ-
ees to and from work.
Employer-provided vehicles. In general, the FMV of an
employer-provided vehicle is the amount the employee Infrequent business use of the vehicle, such as for oc-
would have to pay a third party to lease the same or simi- casional trips to the airport or between your multiple busi-
lar vehicle on the same or comparable terms in the geo- ness premises, isn't regular use of the vehicle in your
graphic area where the employee uses the vehicle. A trade or business.
comparable lease term would be the amount of time the
Mileage test. A vehicle meets the mileage test for a cal-
vehicle is available for the employee's use, such as a
endar year if both of the following requirements are met.
1-year period.
• The vehicle is actually driven at least 10,000 miles
during the year. If you own or lease the vehicle only

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part of the year, reduce the 10,000-mile requirement Commuting Rule
proportionately.
• The vehicle is used during the year primarily by em- Under this rule, you determine the value of a vehicle you
ployees. Consider the vehicle used primarily by em- provide to an employee for commuting use by multiplying
ployees if they use it consistently for commuting. Don't each one-way commute (that is, from home to work or
treat the use of the vehicle by another individual from work to home) by $1.50. If more than one employee
whose use would be taxed to the employee as use by commutes in the vehicle, this value applies to each em-
the employee. ployee. This amount must be included in the employee's
wages or reimbursed by the employee.
For example, if only one employee uses a vehicle dur-
ing the calendar year and that employee drives the vehicle You can use the commuting rule if all the following re-
at least 10,000 miles in that year, the vehicle meets the quirements are met.
mileage test even if all miles driven by the employee are • You provide the vehicle to an employee for use in your
personal. trade or business and, for bona fide noncompensatory
business reasons, you require the employee to com-
Consistency requirements. If you use the
mute in the vehicle. You will be treated as if you had
cents-per-mile rule, the following requirements apply.
met this requirement if the vehicle is generally used
• You must begin using the cents-per-mile rule on the each workday to carry at least three employees to and
first day you make the vehicle available to any em- from work in an employer-sponsored commuting pool.
ployee for personal use. However, if you use the com-
• You establish a written policy under which you don't al-
muting rule (discussed later) when you first make the
low the employee, nor any individual whose use would
vehicle available to any employee for personal use,
be taxable to the employee, to use the vehicle for per-
you can change to the cents-per-mile rule on the first
sonal purposes other than for commuting or de mini-
day for which you don't use the commuting rule.
mis personal use (such as a stop for a personal errand
• You must use the cents-per-mile rule for all later years on the way between a business delivery and the em-
in which you make the vehicle available to any em- ployee's home). Personal use of a vehicle is all use
ployee and the vehicle qualifies, except that you can that isn't for your trade or business.
use the commuting rule for any year during which use
• The employee doesn't use the vehicle for personal
of the vehicle qualifies under the commuting rule.
purposes other than commuting and de minimis per-
However, if the vehicle doesn't qualify for the
sonal use.
cents-per-mile rule during a later year, you can use for
that year and thereafter any other rule for which the • If this vehicle is an automobile (any four-wheeled vehi-
vehicle then qualifies. cle, such as a car, pickup truck, or van), the employee
who uses it for commuting isn't a control employee.
• You must continue to use the cents-per-mile rule if you
See Control employee, later.
provide a replacement vehicle to the employee (and
the vehicle qualifies for the use of this rule) and your Vehicle. For this rule, a vehicle is any motorized wheeled
primary reason for the replacement is to reduce fed- vehicle (including an automobile) manufactured primarily
eral taxes. for use on public streets, roads, and highways.

Items included in cents-per-mile rate. The Control employee. A control employee of a nongovern-
cents-per-mile rate includes the value of maintenance and ment employer for 2024 is generally any of the following
insurance for the vehicle. Don't reduce the rate by the employees.
value of any service included in the rate that you didn't
provide. You can take into account the services actually • A board- or shareholder-appointed, confirmed, or
provided for the vehicle by using the general valuation elected officer whose pay is $135,000 or more.
rule, earlier. • A director.
For miles driven in the United States, its territories,
Canada, and Mexico, the cents-per-mile rate includes the • An employee whose pay is $275,000 or more.
value of fuel you provide. If you don't provide fuel, you can • An employee who owns a 1% or more equity, capital,
reduce the rate by no more than 5.5 cents. or profits interest in your business.
For special rules that apply to fuel you provide for miles A control employee for a government employer for 2024
driven outside the United States, Canada, and Mexico, is either of the following.
see Regulations section 1.61-21(e)(3)(ii)(B).
The value of any other service you provide for a vehicle • A government employee whose compensation is
isn't included in the cents-per-mile rate. Use the general equal to or exceeds Federal Government Executive
valuation rule to value these services. Level V. Go to the Office of Personnel Management
website at OPM.gov/policy-data-oversight/pay-leave/
salaries-wages for 2024 compensation information.
• An elected official.

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Highly compensated employee alternative. In- 2. You must use this rule for all later years in which you
stead of using the preceding definition, you can choose to make the automobile available to any employee, ex-
define a control employee as any highly compensated em- cept that you can use the commuting rule for any year
ployee. A highly compensated employee for 2024 is an during which use of the automobile qualifies.
employee who meets either of the following tests.
3. You must continue to use this rule if you provide a re-
1. The employee was a 5% owner at any time during the placement automobile to the employee and your pri-
year or the preceding year. mary reason for the replacement is to reduce federal
taxes.
2. The employee received more than $150,000 in pay for
the preceding year.
Annual Lease Value
You can choose to ignore test (2) if the employee wasn't
also in the top 20% of employees when ranked by pay for Generally, you figure the annual lease value of an automo-
the preceding year. bile as follows.
1. Determine the FMV of the automobile on the first date
Lease Value Rule it is available to any employee for personal use.
Under this rule, you determine the value of an automobile 2. Using Table 3-1, read down column (1) until you come
you provide to an employee by using its annual lease to the dollar range within which the FMV of the auto-
value. For an automobile provided only part of the year, mobile falls. Then read across to column (2) to find
use either its prorated annual lease value or its daily lease the annual lease value.
value (discussed later). 3. Multiply the annual lease value by the percentage of
If the automobile is used by the employee in your busi- personal miles out of total miles driven by the em-
ness, you generally reduce the lease value by the amount ployee.
that is excluded from the employee's wages as a working
condition benefit (discussed earlier in section 2). In order
to do this, the employee must account to the employer for
the business use. This is done by substantiating the usage
(mileage, for example), the time and place of the travel,
and the business purpose of the travel. Written records
made at the time of each business use are the best evi-
dence. Any use of a company-provided vehicle that isn't
substantiated as business use is included in income. The
working condition benefit is the amount that would be an
allowable business expense deduction for the employee if
the employee paid for the use of the vehicle.

Automobile. For this rule, an automobile is any
four-wheeled vehicle (such as a car, pickup truck, or van)
manufactured primarily for use on public streets, roads,
and highways.

Consistency requirements. If you use the lease value
rule, the following requirements apply.
1. You must begin using this rule on the first day you
make the automobile available to any employee for
personal use. However, the following exceptions ap-
ply.
a. If you use the commuting rule (discussed earlier in
this section) when you first make the automobile
available to any employee for personal use, you
can change to the lease value rule on the first day
for which you don't use the commuting rule.
b. If you use the cents-per-mile rule (discussed ear-
lier in this section) when you first make the auto-
mobile available to any employee for personal use,
you can change to the lease value rule on the first
day on which the automobile no longer qualifies
for the cents-per-mile rule.

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Table 3-1. Annual Lease Value Table                                        specialized  equipment  in  a  trade  or  business  other  than 
                                                                           yours.
(1) Automobile FMV                                        (2) Annual Lease Neither the amount the employee considers to be the 
                                                            Value
                                                                           value of the benefit nor your cost for either buying or leas-
$ 0 to 999. . . . . . . . . . . . . . . . . . . . . . . . $  600           ing  the  automobile  determines  its  FMV.  However,  see 
1,000 to 1,999. . . . . . . . . . . . . . . . . . . .       850
2,000 to 2,999. . . . . . . . . . . . . . . . . . . .       1,100          Safe-harbor value next.
3,000 to 3,999. . . . . . . . . . . . . . . . . . . .       1,350          Safe-harbor  value.    You  may  be  able  to  use  a 
4,000 to 4,999. . . . . . . . . . . . . . . . . . . .       1,600          safe-harbor value as the FMV.
5,000 to 5,999. . . . . . . . . . . . . . . . . . . .       1,850
6,000 to 6,999. . . . . . . . . . . . . . . . . . . .       2,100          For  an  automobile  you  bought  at  arm's  length,  the 
7,000 to 7,999. . . . . . . . . . . . . . . . . . . .       2,350          safe-harbor  value  is  your  cost,  including  sales  tax,  title, 
8,000 to 8,999. . . . . . . . . . . . . . . . . . . .       2,600          and other purchase expenses. This method isn’t available 
9,000 to 9,999. . . . . . . . . . . . . . . . . . . .       2,850          for an automobile you manufactured.
10,000 to 10,999. . . . . . . . . . . . . . . . . . .       3,100          For  an  automobile  you  lease,  you  can  use  any  of  the 
11,000 to 11,999. . . . . . . . . . . . . . . . . . .       3,350          following as the safe-harbor value.
12,000 to 12,999. . . . . . . . . . . . . . . . . . .       3,600
13,000 to 13,999. . . . . . . . . . . . . . . . . . .       3,850          • The manufacturer's invoice price (including options) 
14,000 to 14,999. . . . . . . . . . . . . . . . . . .       4,100            plus 4%.
15,000 to 15,999. . . . . . . . . . . . . . . . . . .       4,350
16,000 to 16,999. . . . . . . . . . . . . . . . . . .       4,600          • The manufacturer's suggested retail price minus 8% 
17,000 to 17,999. . . . . . . . . . . . . . . . . . .       4,850            (including sales tax, title, and other expenses of pur-
18,000 to 18,999. . . . . . . . . . . . . . . . . . .       5,100            chase).
19,000 to 19,999. . . . . . . . . . . . . . . . . . .       5,350
20,000 to 20,999. . . . . . . . . . . . . . . . . . .       5,600          • The retail value of the automobile reported by a na-
21,000 to 21,999. . . . . . . . . . . . . . . . . . .       5,850            tionally recognized pricing source if that retail value is 
22,000 to 22,999. . . . . . . . . . . . . . . . . . .       6,100            reasonable for the automobile.
23,000 to 23,999. . . . . . . . . . . . . . . . . . .       6,350
24,000 to 24,999. . . . . . . . . . . . . . . . . . .       6,600          Items included in annual lease value table.   Each an-
25,000 to 25,999. . . . . . . . . . . . . . . . . . .       6,850          nual lease value in the table includes the value of mainte-
26,000 to 27,999. . . . . . . . . . . . . . . . . . .       7,250          nance and insurance for the automobile. Don't reduce the 
28,000 to 29,999. . . . . . . . . . . . . . . . . . .       7,750
30,000 to 31,999. . . . . . . . . . . . . . . . . . .       8,250          annual lease value by the value of any of these services 
32,000 to 33,999. . . . . . . . . . . . . . . . . . .       8,750          that you didn't provide. For example, don't reduce the an-
34,000 to 35,999. . . . . . . . . . . . . . . . . . .       9,250          nual  lease  value  by  the  value  of  a  maintenance  service 
36,000 to 37,999. . . . . . . . . . . . . . . . . . .       9,750          contract or insurance you didn't provide. You can take into 
38,000 to 39,999. . . . . . . . . . . . . . . . . . .     10,250           account the services actually provided for the automobile 
40,000 to 41,999. . . . . . . . . . . . . . . . . . .     10,750           by using the general valuation rule discussed earlier.
42,000 to 43,999. . . . . . . . . . . . . . . . . . .     11,250
44,000 to 45,999. . . . . . . . . . . . . . . . . . .     11,750           Items not included.    The annual lease value doesn't 
46,000 to 47,999. . . . . . . . . . . . . . . . . . .     12,250           include  the  value  of  fuel  you  provide  to  an  employee  for 
48,000 to 49,999. . . . . . . . . . . . . . . . . . .     12,750           personal use, regardless of whether you provide it, reim-
50,000 to 51,999. . . . . . . . . . . . . . . . . . .     13,250           burse its cost, or have it charged to you. You must include 
52,000 to 53,999. . . . . . . . . . . . . . . . . . .     13,750
54,000 to 55,999. . . . . . . . . . . . . . . . . . .     14,250           the value of the fuel separately in the employee's wages. 
56,000 to 57,999. . . . . . . . . . . . . . . . . . .     14,750           You can value fuel you provided at FMV or at 5.5 cents per 
58,000 to 59,999. . . . . . . . . . . . . . . . . . .     15,250           mile  for  all  miles  driven  by  the  employee.  However,  you 
                                                                           can't value at 5.5 cents per mile fuel you provide for miles 
For  automobiles  with  an  FMV  of  more  than  $59,999,                  driven outside the United States (including its territories), 
the annual lease value equals (0.25 × the FMV of the au-                   Canada, and Mexico.
tomobile) + $500.                                                          If  you  reimburse  an  employee  for  the  cost  of  fuel,  or 
                                                                           have it charged to you, you generally value the fuel at the 
FMV.  The FMV of an automobile is the amount a person                      amount you reimburse, or the amount charged to you if it 
would  pay  to  buy  it  from  a  third  party  in  an  arm's-length       was bought at arm's length.
transaction in the area in which the automobile is bought                  If  you  have  20  or  more  automobiles,  see  Regulations 
or  leased.  That  amount  includes  all  purchase  expenses,              section 1.61-21(d)(3)(ii)(D).
such as sales tax and title fees.                                          If you provide any service other than maintenance and 
If  you  have  20  or  more  automobiles,  see  Regulations                insurance  for  an  automobile,  you  must  add  the  FMV  of 
section 1.61-21(d)(5)(v). If you and the employee own or                   that service to the annual lease value of the automobile to 
lease  the  automobile  together,  see  Regulations  section               figure the value of the benefit.
1.61-21(d)(2)(ii).
You  don't  have  to  include  the  value  of  a  telephone  or            4-year lease term.  The annual lease values in the table 
any specialized equipment added to, or carried in, the au-                 are based on a 4-year lease term. These values will gen-
tomobile if the equipment is necessary for your business.                  erally stay the same for the period that begins with the first 
However, include the value of specialized equipment if the                 date you use this rule for the automobile and ends on De-
employee  to  whom  the  automobile  is  available  uses  the              cember  31  of  the  fourth  full  calendar  year  following  that 
                                                                           date.

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Figure the annual lease value for each later 4-year pe- to figure its value. Figure the daily lease value by multiply-
riod by determining the FMV of the automobile on January ing the annual lease value by a fraction, using four times
1 of the first year of the later 4-year period and selecting the number of days of availability as the numerator and
the amount in column (2) of the table that corresponds to 365 as the denominator.
the appropriate dollar range in column (1).
However, you can apply a prorated annual lease value
Using the special accounting rule. If you use the for a period of continuous availability of less than 30 days
special accounting rule for fringe benefits discussed in by treating the automobile as if it had been available for 30
section 4, you can figure the annual lease value for each days. Use a prorated annual lease value if it would result
later 4-year period at the beginning of the special account- in a lower valuation than applying the daily lease value to
ing period that starts immediately before the January 1 the shorter period of availability.
date described in the previous paragraph.
For example, assume that you use the special account-
ing rule and that, beginning on November 1, 2023, the Unsafe Conditions Commuting Rule

special accounting period is November 1 to October 31. Under this rule, the value of commuting transportation you
You elected to use the lease value rule as of January 1, provide to a qualified employee solely because of unsafe
2024. You can refigure the annual lease value on Novem- conditions is $1.50 for a one-way commute (that is, from
ber 1, 2027, rather than on January 1, 2028. home to work or from work to home). If more than one em-
Transferring an automobile from one employee to an- ployee commutes in the vehicle, this value applies to each
other. Unless the primary purpose of the transfer is to re- employee. This amount must be included in the employ-
duce federal taxes, you can refigure the annual lease ee's wages or reimbursed by the employee.
value based on the FMV of the automobile on January 1 You can use the unsafe conditions commuting rule for
of the calendar year of transfer. qualified employees if all of the following requirements are
However, if you use the special accounting rule for met.
fringe benefits discussed in section 4, you can refigure the
annual lease value (based on the FMV of the automobile) • The employee would ordinarily walk or use public
transportation for commuting.
at the beginning of the special accounting period in which
the transfer occurs. • You have a written policy under which you don't pro-
vide the transportation for personal purposes other
Prorated Annual Lease Value than commuting because of unsafe conditions.
• The employee doesn't use the transportation for per-
If you provide an automobile to an employee for a continu-
sonal purposes other than commuting because of un-
ous period of 30 or more days but less than an entire cal-
safe conditions.
endar year, you can prorate the annual lease value. Figure
the prorated annual lease value by multiplying the annual These requirements must be met on a trip-by-trip basis.
lease value by a fraction, using the number of days of
availability as the numerator and 365 as the denominator. Commuting transportation. This is transportation to or
from work using any motorized wheeled vehicle (including
If you provide an automobile continuously for at least 30 an automobile) manufactured for use on public streets,
days, but the period covers 2 calendar years (or 2 special roads, and highways. You or the employee must buy the
accounting periods if you’re using the special accounting transportation from a party that isn't related to you. If the
rule for fringe benefits discussed in section 4), you can employee buys it, you must reimburse the employee for its
use the prorated annual lease value or the daily lease cost (for example, cab fare) under a bona fide reimburse-
value. ment arrangement.

If you have 20 or more automobiles, see Regulations Qualified employee. A qualified employee for 2024 is
section 1.61-21(d)(6). one who:
• Performs services during the year;
If an automobile is unavailable to the employee be-
cause of the employee’s personal reasons (for example, if • Is paid on an hourly basis;
the employee is on vacation), you can't take into account • Isn't claimed under section 213(a)(1) of the Fair Labor
the periods of unavailability when you use a prorated an- Standards Act (FLSA) of 1938 (as amended) to be ex-
nual lease value. empt from the minimum wage and maximum hour pro-
You can't use a prorated annual lease value if the visions;
! reduction of federal tax is the main reason the au- • Is within a classification for which you actually pay, or
CAUTION tomobile is unavailable.
have specified in writing that you will pay, overtime pay
of at least one and one-half times the regular rate pro-
Daily Lease Value vided in section 207 of FLSA; and
• Received pay of not more than $150,000 during 2023.
If you provide an automobile to an employee for a continu-
ous period of less than 30 days, use the daily lease value

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However, an employee isn't considered a qualified em- Or you can withhold federal income tax on the value of
ployee if you don't comply with the recordkeeping require- fringe benefits at the flat 22% rate that applies to supple-
ments concerning the employee's wages, hours, and other mental wages. See section 7 of Pub. 15 for the flat rate
conditions and practices of employment under section (37%) when supplemental wage payments to an individual
211(c) of FLSA and the related regulations. exceed $1 million during the year.
You must withhold the applicable income, social secur-
Unsafe conditions. Unsafe conditions exist if, under the ity, and Medicare taxes on the date or dates you chose to
facts and circumstances, a reasonable person would con- treat the benefits as paid. Deposit the amounts withheld
sider it unsafe for the employee to walk or use public as discussed in section 11 of Pub. 15.
transportation at the time of day the employee must com-
mute. One factor indicating whether it is unsafe is the his- Additional Medicare Tax withholding. In addition to
tory of crime in the geographic area surrounding the em- withholding Medicare tax at 1.45%, you must withhold a
ployee's workplace or home at the time of day the 0.9% Additional Medicare Tax from wages you pay to an
employee commutes. employee in excess of $200,000 in a calendar year. You’re
required to begin withholding Additional Medicare Tax in
the pay period in which you pay wages in excess of
$200,000 to an employee and continue to withhold it each
4. Rules for Withholding,
pay period until the end of the calendar year. Additional
Depositing, and Reporting Medicare Tax is only imposed on the employee. There is
no employer share of Additional Medicare Tax. All wages
Use the following guidelines for withholding, depositing, that are subject to Medicare tax are subject to Additional
and reporting taxable noncash fringe benefits. Medicare Tax withholding if paid in excess of the $200,000
withholding threshold.
Valuation of taxable fringe benefits. Generally, you For more information on what wages are subject to
must determine the value of taxable noncash fringe bene- Medicare tax, see Table 2-1, and the chart, Special Rules
fits no later than January 31 of the next year. Before Janu- for Various Types of Services and Payments, in section 15
ary 31, you may reasonably estimate the value of the of Pub. 15. For more information on Additional Medicare
fringe benefits for purposes of withholding and depositing Tax, go to IRS.gov/ADMTfaqs.
on time.
Amount of deposit. To estimate the amount of in-
Choice of period for withholding, depositing, and re- come tax withholding and employment taxes and to de-
porting. For employment tax and withholding purposes, posit them on time, make a reasonable estimate of the
you can treat taxable noncash fringe benefits (including value of the taxable fringe benefits provided on the date or
personal use of employer-provided highway motor vehi- dates you chose to treat the benefits as paid. Determine
cles) as paid on a pay period, quarter, semiannual, an- the estimated deposit by figuring the amount you would
nual, or other basis. But the benefits must be treated as have had to deposit if you had paid cash wages equal to
paid no less frequently than annually. You don't have to the estimated value of the fringe benefits and withheld
choose the same period for all employees. You can with- taxes from those cash wages. Even if you don't know
hold more frequently for some employees than for others. which employee will receive the fringe benefit on the date
You can change the period as often as you like as long the deposit is due, you should follow this procedure.
as you treat all of the benefits provided in a calendar year If you underestimate the value of the fringe benefits and
as paid no later than December 31 of the calendar year. deposit less than the amount you would have had to de-
You can also treat the value of a single fringe benefit as posit if the applicable taxes had been withheld, you may
paid on one or more dates in the same calendar year, be subject to a penalty.
even if the employee receives the entire benefit at one If you overestimate the value of the fringe benefit and
time. For example, if your employee receives a fringe ben- overdeposit, you can either claim a refund or have the
efit valued at $1,000 in one pay period during 2024, you overpayment applied to your next employment tax return.
can treat it as made in four payments of $250, each in a See the instructions for your employment tax return.
different pay period of 2024. You don't have to notify the If you paid the required amount of taxes but withheld a
IRS of the use of the periods discussed above. lesser amount from the employee, you can recover from
the employee the social security, Medicare, or income
Transfer of property. The above choice for reporting taxes you deposited on the employee's behalf and inclu-
and withholding doesn't apply to a cash fringe benefit or a ded on the employee's Form W-2. However, you must re-
fringe benefit that is a transfer of tangible or intangible per- cover the income taxes before April 1 of the following year.
sonal property of a kind normally held for investment or a
transfer of real property. For these kinds of fringe benefits, Paying your employee's share of social security and
you must use the actual date the property was transferred Medicare taxes. If you choose to pay your employee's
to the employee. social security and Medicare taxes on taxable fringe bene-
fits without deducting them from the employee’s pay, you
Withholding and depositing taxes. You can add the must include the amount of the payments in the employ-
value of taxable fringe benefits to regular wages for a pay- ee's wages. Also, if your employee leaves your employ-
roll period and figure income tax withholding on the total. ment and you have unpaid and uncollected taxes for

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noncash benefits, you’re still liable for those taxes. You employees. You can withhold income tax from the wages
must add the uncollected employee share of social secur- of some employees but not others. You must, however,
ity and Medicare taxes to the employee's wages. Follow withhold the applicable social security and Medicare taxes
the procedure discussed under Employee's Portion of on such benefits.
Taxes Paid by Employer in section 7 of Pub. 15-A. Don't You can choose not to withhold income tax on an em-
use withheld federal income tax to pay the social security ployee's personal use of a highway motor vehicle by:
and Medicare taxes.
• Notifying the employee (as described below) that you
Special accounting rule. You can treat the value of tax- choose not to withhold; and
able noncash benefits as paid on a pay period, quarter, • Including the value of the benefits in boxes 1, 3, 5, and
semiannual, annual, or other basis, provided that the ben- 14 on a timely furnished Form W-2. For use of a sepa-
efits are treated as paid no less frequently than annually. rate statement in lieu of using box 14, see the General
You can treat the value of taxable noncash fringe benefits Instructions for Forms W-2 and W-3.
provided during the last 2 months of the calendar year, or
The notice must be in writing and must be provided to
any shorter period within the last 2 months, as paid in the
the employee by January 31 of the election year or within
next year. Thus, the value of taxable noncash benefits ac-
30 days after a vehicle is first provided to the employee,
tually provided in the last 2 months of 2023 could be trea-
whichever is later. This notice must be provided in a man-
ted as provided in 2024 together with the value of benefits
ner reasonably expected to come to the attention of the af-
provided in the first 10 months of 2024. This doesn't mean
fected employee. For example, the notice may be mailed
that all benefits treated as paid during the last 2 months of
to the employee, included with a paycheck, or posted
a calendar year can be deferred until the next year. Only
where the employee could reasonably be expected to see
the value of benefits actually provided during the last 2
it. You can also change your election not to withhold at any
months of the calendar year can be treated as paid in the
time by notifying the employee in the same manner.
next calendar year.
Limitation. The special accounting rule can't be used, Amount to report on Form 941 (or Form 943, 944, or
however, for a fringe benefit that is a transfer of tangible or CT-1) and Form W-2. The actual value of fringe benefits
intangible personal property of a kind normally held for in- provided during a calendar year (or other period as ex-
vestment or a transfer of real property. plained under Special accounting rule, earlier in this sec-
tion) must be determined by January 31 of the following
Conformity rules. Use of the special accounting rule year. You must report the actual value on Form 941 (or
is optional. You can use the rule for some fringe benefits Form 943, 944, or CT-1) and Form W-2. If you choose,
but not others. The period of use doesn't need to be the you can use a separate Form W-2 for fringe benefits and
same for each fringe benefit. However, if you use the rule any other benefit information.
for a particular fringe benefit, you must use it for all em- Include the value of the fringe benefit in box 1 of Form
ployees who receive that benefit. W-2. Also include it in boxes 3 and 5, if applicable. You
If you use the special accounting rule, your employee may show the total value of the fringe benefits provided in
must also use it for the same period you use it. But your the calendar year or other period in box 14 of Form W-2.
employee can't use the special accounting rule unless you For additional information about reporting of fringe bene-
do. fits on Form W-2, see the General Instructions for Forms
You don't have to notify the IRS if you use the special W-2 and W-3.
accounting rule. You may also, for appropriate administra- If you use the special accounting rule, you must notify
tive reasons, change the period for which you use the rule the affected employees of the period in which you used it.
without notifying the IRS. But you must report the income You must give this notice at or near the date you give the
and deposit the withheld taxes as required for the Form W-2, but not earlier than with the employee's last
changed period. paycheck of the calendar year.
Special rules for highway motor vehicles. If an em-
ployee uses the employer's vehicle for personal purposes,
the value of that use must be determined by the employer How To Get Tax Help
and included in the employee's wages. The value of the
personal use must be based on the FMV or determined by If you have questions about a tax issue; need help prepar-
using one of the following three special valuation rules ing your tax return; or want to download free publications,
previously discussed in section 3. forms, or instructions, go to IRS.gov to find resources that
can help you right away.
• The cents-per-mile rule.
• The commuting rule (for commuting use only). Preparing and filing your tax return. Go to IRS.gov/
EmploymentEfile for more information on filing your em-
• The lease value rule. ployment tax returns electronically.
Election not to withhold income tax. You can Getting answers to your tax questions. On
choose not to withhold income tax on the value of an em- IRS.gov, you can get up-to-date information on
ployee's personal use of a highway motor vehicle you pro- current events and changes in tax law.
vided. You don't have to make this choice for all

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Online tax information in other languages. You can
• IRS.gov/Help: A variety of tools to help you get an-
find information on IRS.gov/MyLanguage if English isn’t
swers to some of the most common tax questions.
your native language.
• IRS.gov/Forms: Find forms, instructions, and publica-
tions. You will find details on the most recent tax Free Over-the-Phone Interpreter (OPI) Service. The
changes and interactive links to help you find answers IRS is committed to serving taxpayers with limited-English
to your questions. proficiency (LEP) by offering OPI services. The OPI Serv-
ice is a federally funded program and is available at Tax-
• You may also be able to access tax information in your
payer Assistance Centers (TACs), most IRS offices, and
e-filing software.
every VITA/TCE tax return site. The OPI Service is acces-
sible in more than 350 languages.
Need someone to prepare your tax return? There are
various types of tax return preparers, including enrolled Accessibility Helpline available for taxpayers with
agents, certified public accountants (CPAs), accountants, disabilities. Taxpayers who need information about ac-
and many others who don’t have professional credentials. cessibility services can call 833-690-0598. The Accessi-
If you choose to have someone prepare your tax return, bility Helpline can answer questions related to current and
choose that preparer wisely. A paid tax preparer is: future accessibility products and services available in al-
ternative media formats (for example, braille, large print,
• Primarily responsible for the overall substantive accu- audio, etc.). The Accessibility Helpline doesn’t have ac-
racy of your return, cess to your IRS account. For help with tax law, refunds, or
• Required to sign the return, and account-related issues, go to IRS.gov/LetUsHelp.

• Required to include their preparer tax identification Disasters. Go to IRS.gov/DisasterRelief to review the
number (PTIN). available disaster tax relief.
Although the tax preparer always signs the return,
Getting tax forms and publications. Go to IRS.gov/
! you're ultimately responsible for providing all the Forms to view, download, or print most of the forms, in-
CAUTION information required for the preparer to accurately
structions, and publications you may need. Or, you can go
prepare your return and for the accuracy of every item re-
to IRS.gov/OrderForms to place an order.
ported on the return. Anyone paid to prepare tax returns
for others should have a thorough understanding of tax Getting tax publications and instructions in eBook
matters. For more information on how to choose a tax pre- format. Download and view most tax publications and in-
parer, go to Tips for Choosing a Tax Preparer on IRS.gov. structions (including Pub. 15-B) on mobile devices as
eBooks at IRS.gov/eBooks.
IRS eBooks have been tested using Apple's iBooks for
Employers can register to use Business Services On-
iPad. Our eBooks haven’t been tested on other dedicated
line. The Social Security Administration (SSA) offers on-
eBook readers, and eBook functionality may not operate
line service at SSA.gov/employer for fast, free, and secure
as intended.
W-2 filing options to CPAs, accountants, enrolled agents,
and individuals who process Form W-2 and Form W-2c. Get a transcript of your return. You can get a copy of
your tax transcript or a copy of your return by calling
IRS social media. Go to IRS.gov/SocialMedia to see the
800-829-4933 or by mailing Form 4506-T (transcript re-
various social media tools the IRS uses to share the latest
quest) or Form 4506 (copy of return) to the IRS.
information on tax changes, scam alerts, initiatives, prod-
ucts, and services. At the IRS, privacy and security are our Reporting and resolving your tax-related identity
highest priority. We use these tools to share public infor- theft issues.
mation with you. Don’t post your social security number
(SSN) or other confidential information on social media • Tax-related identity theft happens when someone
sites. Always protect your identity when using any social steals your personal information to commit tax fraud.
networking site. Your taxes can be affected if your EIN is used to file a
The following IRS YouTube channels provide short, in- fraudulent return or to claim a refund or credit.
formative videos on various tax-related topics in English, • The IRS doesn’t initiate contact with taxpayers by
Spanish, and ASL. email, text messages (including shortened links), tele-
• Youtube.com/irsvideos. phone calls, or social media channels to request or
verify personal or financial information. This includes
• Youtube.com/irsvideosmultilingua. requests for personal identification numbers (PINs),
• Youtube.com/irsvideosASL. passwords, or similar information for credit cards,
banks, or other financial accounts.
Watching IRS videos. The IRS Video portal
(IRSVideos.gov) contains video and audio presentations • Go to IRS.gov/IdentityTheft, the IRS Identity Theft
Central webpage, for information on identity theft and
for individuals, small businesses, and tax professionals.
data security protection for taxpayers, tax professio-
nals, and businesses. If your EIN has been lost or

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stolen or you suspect you’re a victim of tax-related now provide service by appointment, so you’ll know in ad-
identity theft, you can learn what steps you should vance that you can get the service you need without long
take. wait times. Before you visit, go to IRS.gov/TACLocator to
find the nearest TAC and to check hours, available serv-
Making a tax payment. Payments of U.S. tax must be ices, and appointment options. Or, on the IRS2Go app,
remitted to the IRS in U.S. dollars. Digital assets are not under the Stay Connected tab, choose the Contact Us op-
accepted. Go to IRS.gov/Payments for information on how tion and click on “Local Offices.”
to make a payment using any of the following options.
• Debit Card, Credit Card, or Digital Wallet: Choose an The Taxpayer Advocate Service (TAS)
approved payment processor to pay online or by
Is Here To Help You
phone.
• Electronic Funds Withdrawal: Schedule a payment What Is TAS?
when filing your federal taxes using tax return prepara-
tion software or through a tax professional. TAS is an independent organization within the IRS that
helps taxpayers and protects taxpayer rights. TAS strives
• Electronic Federal Tax Payment System: Best option to ensure that every taxpayer is treated fairly and that you
for businesses. Enrollment is required. know and understand your rights under the Taxpayer Bill
• Check or Money Order: Mail your payment to the ad- of Rights.
dress listed on the notice or instructions.
How Can You Learn About Your Taxpayer
• Cash: You may be able to pay your taxes with cash at
a participating retail store. Rights?

• Same-Day Wire: You may be able to do same-day The Taxpayer Bill of Rights describes 10 basic rights that
wire from your financial institution. Contact your finan- all taxpayers have when dealing with the IRS. Go to
cial institution for availability, cost, and time frames. TaxpayerAdvocate.IRS.gov to help you understand what
these rights mean to you and how they apply. These are
Note. The IRS uses the latest encryption technology to
your rights. Know them. Use them.
ensure that the electronic payments you make online, by
phone, or from a mobile device using the IRS2Go app are
safe and secure. Paying electronically is quick, easy, and What Can TAS Do for You?
faster than mailing in a check or money order.
TAS can help you resolve problems that you can’t resolve
What if I can’t pay now? Go to IRS.gov/Payments for with the IRS. And their service is free. If you qualify for
more information about your options. their assistance, you will be assigned to one advocate
who will work with you throughout the process and will do
• Apply for an online payment agreement IRS.gov/ (
everything possible to resolve your issue. TAS can help
OPA) to meet your tax obligation in monthly install-
you if:
ments if you can’t pay your taxes in full today. Once
you complete the online process, you will receive im- • Your problem is causing financial difficulty for you,
mediate notification of whether your agreement has your family, or your business;
been approved. • You face (or your business is facing) an immediate
• Use the Offer in Compromise Pre-Qualifier to see if threat of adverse action; or
you can settle your tax debt for less than the full • You’ve tried repeatedly to contact the IRS but no one
amount you owe. For more information on the Offer in has responded, or the IRS hasn’t responded by the
Compromise program, go to IRS.gov/OIC. date promised.
Understanding an IRS notice or letter you’ve re-
ceived. Go to IRS.gov/Notices to find additional informa- How Can You Reach TAS?
tion about responding to an IRS notice or letter.
TAS has offices in every state, the District of Columbia,
Responding to an IRS notice or letter. You can now and Puerto Rico. To find your advocate’s number:
upload responses to all notices and letters using the Go to TaxpayerAdvocate.IRS.gov/Contact-Us;
•
Document Upload Tool. For notices that require additional
action, taxpayers will be redirected appropriately on • Download Pub. 1546, The Taxpayer Advocate Service
IRS.gov to take further action. To learn more about the Is Your Voice at the IRS, available at IRS.gov/pub/irs-
tool, go to IRS.gov/Upload. pdf/p1546.pdf;
Contacting your local TAC. Keep in mind, many ques- • Call the IRS toll free at 800-TAX-FORM
(800-829-3676) to order a copy of Pub. 1546;
tions can be answered on IRS.gov without visiting a TAC.
Go to IRS.gov/LetUsHelp for the topics people ask about • Check your local directory; or
most. If you still need help, TACs provide tax help when a Call TAS toll free at 877-777-4778.
•
tax issue can’t be handled online or by phone. All TACs

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How Else Does TAS Help Taxpayers?                            report it to TAS at IRS.gov/SAMS. Be sure to not include 
                                                             any personal taxpayer information.
TAS  works  to  resolve  large-scale  problems  that  affect 
many taxpayers. If you know of one of these broad issues, 

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                       To help us develop a more useful index, please let us know if you have ideas for index entries.
Index                  See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
 
                                           Fringe benefit overview 3                  Picnics 9
A                                          Fringe benefits:                           Product testing 24
Accident benefits   5                        Special accounting rule 31               Prorated annual lease value  29
Achievement awards     7                     Valuation rules 25                       Provider defined  3
Additional Medicare Tax     30                                                        Publications (See Tax help)
Adoption assistance    8                   G
Annual lease value    27                   General valuation rule 25                  Q
Annual lease value table    28             Group-term life insurance 13               Qualified small employer health 
Assistance (See Tax help)                                                              reimbursement arrangements 
Athletic facilities 9                      H                                           (QSEHRAs)    7
                                                                                      Qualified transportation benefits  21
Automobile (See Vehicles)                  Health benefits 5
Awards, achievement    7                   Health flexible spending arrangement       R
                                             (FSA)  2 4, 
B                                          Health savings accounts (HSAs)  15         Recipient defined 3
Bicycle commuting reimbursement      2 21, Holiday gifts 9                            Reporting rules 30
Birthday gifts 9                                                                      Retirement planning services  20
                                           I
C                                          Insurance:                                 S
Cafeteria plans 3                            Accident and health 5                    Safety achievement awards   7
Cents-per-mile rule   1 25,                  Group-term life 13                       Self insurance (medical reimbursement 
COBRA premiums      7                        Long-term care  6                         plans)  5
Comments on publication     2                                                         Services, no-additional-cost 19
Commuter highway vehicle       21          L                                          Simple cafeteria plans for small 
                                                                                       businesses   4
Commuting rule   26                        Lease value rule  27                       Special accounting rule 31
Compensation reduction agreements    21    Length of service awards  7                Stock options, employee 12
Copying machine use    9                   Life insurance:                            Student loan payment exclusion     10
                                             Group-term  13                           Suggestions for publication  2
D                                            Spouse or dependent  9
Daily lease value   29                     Lodging  16                                T
De minimis (minimal) benefits:             Long-term care insurance  6
                                                                                      Tax help 31
  In general 9                                                                        Taxable benefits 3
  Meals 17                                 M                                          Tickets for theater or sporting events 9
  Transportation 20                        Meals:                                     Transit pass 21
Definition of marriage 2                     De minimis  17                           Transportation benefits:
Demonstrator cars     23                     On your business premises  18             De minimis   20
Dependent care assistance      10          Medical reimbursement plans  5              Qualified 21
Deposit rules  30                          Minimal benefits  9                        Tuition reduction 22
Discounts for employees     11             Moving expense reimbursement    2
                                                                                      U
E                                          N                                          Unsafe conditions commuting rule     29
Educational assistance   10                No-additional-cost services  19
Employee benefit programs:                 Nonpersonal use vehicles, qualified 23     V
  Accident and health benefits 5
                                                                                      Valuation rules 25
  Cafeteria plans   3                      O                                          Vans 23
  Dependent care assistance    10
  Educational assistance    10             Options on stock   12                      Vehicles:
  Group-term life insurance 13             Outplacement services   24                  Business use of (See Working condition 
Employee discounts     11                                                              benefits)
Employee stock options      12             P                                           Commuter highway   21
Employer-operated eating facility 17       P.L. 115-97, Tax Cuts and Jobs Act 2 18, ,  Qualified nonpersonal use 23
Employer-provided cell phones     13         21 22,                                    Valuation of 25
Exclusion rules  5                         Parking, qualified 21
                                           Parties 9                                  W
F                                          Performance of services   3                Withholding rules 30
                                           Pickup trucks 23
Fair market value (FMV)   25                                                          Working condition benefits 22

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