A fringe benefit is a form of pay (other than traditional compensation) for the performance of services in the workplace. In general, workplace fringe benefits are taxable to the individual to whom they are provided, and must be included in the individual's income unless specifically excluded under the Internal Revenue Code (Code). However, the Code contains exclusion and deduction rules for certain fringe benefits (for example, adoption expenses, education expenses, and employee discounts). The applicable limits for some of these fringe benefits are inflation-adjusted by the IRS on an annual basis (see Legal Update, IRS Announces 2024 COLAs for Health and Welfare Plans).

Tax reform legislation enacted in December 2017 made significant changes to several Code provisions governing certain employer-sponsored fringe benefits, including:

(Tax Cuts and Jobs Act (TCJA), Pub. L. 115-97 (2017); see Legal Update, Tax Reform Is Enacted, With Significant Implications for Executive Compensation and Employee Benefits.) Since 2018, the TCJA has been the topic of IRS implementing guidance issued in the fringe benefits space (for example, see Legal Update, IRS Proposed Rules Address TCJA's Elimination of Deduction for Qualified Transportation Fringe Benefit Expenses).

This Fringe Benefits Toolkit includes several continuously updated resources designed to help employer-plan sponsors, service providers, practitioners, and other advisors comply with requirements under the Code and other laws applicable to workplace fringe benefits.