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Pump up the tax breaks for an on-site ‘fitness facility’

by on
in Employee Benefits Program,Human Resources

Employees who are more physically fit are often more productive and less of a burden on your health-insurance plan.

You can do your part by providing incentives to employees (including the top echelon) to exercise or pursue recreational activities. Example: Your company might include memberships to a fitness club in its fringe benefit package.

Strategy: Consider all the tax factors first. When all is said and done, it may be preferable to add an on-site facility to the business premises.

Here’s why: If you pay an employee’s membership fees to an athletic facility, the payments are taxable to the employee as compensation. A new IRS ruling verifies that such incentives won’t qualify as a tax-free fringe benefit. (IRS UIL 132:08-05)

However, you can work around that restrictive tax rule using a little-known loophole in the law: The benefit of using an employer-provided athletic facility on the business premises is exempt from tax. The term “athletic facility” includes any gym or other athletic facility, such as a pool, tennis court or fitness room.

To qualify for the tax break, the facility must be used only by employees, their spouses and their children.

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