Chapter 3 Fringe Benefits

Employer-furnished fringe benefits are exempt from tax if the tests discussed in this chapter are met.

The most common tax-free benefits are accident and health plan coverage, including employer contributions to health savings accounts (HSAs), group-term life insurance plans, dependent care plans, education assistance plans, tuition reduction plans, adoption benefit plans, cafeteria plans, and plans providing employees with discounts, no-additional-cost services, or employer-subsidized meal facilities.

Highly compensated individuals may be taxed on certain benefits from such plans if nondiscrimination rules are not met.

Table 3-1 Are Your Fringe Benefits Tax Free?

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