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Tax Exclusions of Meals and Lodging

August 4, 2015

Author: Whitney Gordon, Staff II in Tax at LGT
 

 
Employers and employees are often left wondering what benefits offered by the employer should be included in an employee’s gross income.
 
 
 
The following list itemizes a few simple requirements that must be met in order to exclude the value of meals and lodging provided to an employee from gross income.

 
• Employer purchased meals: If a meal is offered to an employee for the convenience of the employer, such as making the employee available to the employer during a busy time and the meal is offered on the business’ premises, it may be excluded.
• On-site living: When an employee is required to live on the premises, all meals can be excluded. If the cost of lodging is to be excluded from gross income, the lodging must be a requirement of the employer. However, if the employee has a choice to live somewhere else, this benefit’s value should be included with gross income.
• Small meals and snacks: For example, soft drinks available to employees throughout the day may be excluded because the value is inconsequential.
• Discounts: If the above requirements are not met, but the employee is offered meals and lodging at a discount, the discount may be excluded from gross income.
 
Conversely, there are a few circumstances that should always be included in an employee’s gross income.
• A Cash Meal Allowance: If given to an employee, it must be included in gross income.
• Choice between meals or additional income: The value of the benefit the employee chooses must be included in gross income. This is true for lodging, as well.
 
An important note to consider when determining gross income for federal income tax purposes is that the above requirements take precedence in the event an employer contract or state statute offers any contradictory guidance.
 
The services of a legal or tax advisor should be sought before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt, PLLC, call 214.871.7500 or email at askus@lgt-cpa.com.

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