If you're looking for ways to keep key employees happy, consider nontaxable fringe benefits. While most valuable benefits reserved for officers, executives, and highly paid employees are taxable to them at fair market value, not all are. The nondiscrimination rules do not apply to employee parking, for example. So if finding a parking spot near your company is a hassle, why not rent private parking spaces for your top people at a nearby garage? Special rates for multiple users are usually available, and the expense is also tax deductible for the company.
Another nontaxable fringe benefit, albeit a more costly one, is to provide athletic facilities for key people. The tax regulations mention a gym, pool, tennis court, and golf course, but the list is not exclusive. As you probably know, the value of company-paid memberships for executives in country clubs or health clubs is usually taxable, but the nondiscrimination rules do not apply to company-provided facilities. These need not be located in your workplace, but they must be on the premises of the employer, which means space you own, lease, or rent. Their use must be limited to employees, their spouses, and dependents. And your company must be responsible for the operation, which you can subcontract to other professionals. If you own the facility, you can recover the cost through the depreciation allowance. If you lease or rent it, the expense is tax deductible.
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