3.10 De Minimis Fringe Benefits

Small benefits that would be administratively impractical to tax are considered tax-free de minimis (minor) fringe benefits. Examples are personal use of an employer-provided cell phone (see below), occasional meal money or local transportation fares given to employees working overtime, employer-provided coffee, doughnuts, or soft drinks, personal use of company copying machines, company parties, or tickets for the theater or sporting events.

Personal use of employer-provided cell phone.

If your employer gives you a phone for substantial business reasons, the value of the phone is a tax-free working condition fringe benefit (3.9). In such a case, your personal use of the phone is tax free as a de minimis benefit.

Company eating facility.

The value of meals provided to employees on workdays at a subsidized eating facility is a tax-free de minimis fringe benefit if the facility is located on or near the business premises and the annual revenue from meal charges equals or exceeds the facility’s direct operating costs. Revenue is treated as equal to operating costs for meals that are tax-free to employees under the employer convenience test (3.13).

Highly compensated employees or owners with special access to executive dining rooms may not exclude the value of their meals as a de minimis fringe benefit; however, the meals may be tax free if meals must be taken on company premises for business reasons (3.13).

Commuting under unsafe circumstances.

If you are asked to work outside your normal working hours and due to unsafe conditions your employer provides transportation such as taxi fare, the first $1.50 per one-way commute is taxable but the excess over $1.50 is a tax-free de minimis benefit. This exclusion is not available to certain highly compensated employees and officers, corporate directors, or owners of 1% or more of the company.

Even when working their regular shift, hourly employees eligible for overtime who are not considered highly compensated are taxed on only $1.50 per one-way commute if their employer pays for car service or taxi fare because walking or taking public transportation to or from work would be unsafe. The excess value of the transportation over $1.50 is tax free. These rules can apply to day-shift employees who work overtime as well as night-shift employees working regular hours so long as transportation is provided because of unsafe conditions.

Planning Reminder

Occasional Overtime Meal Money or Cab Fare

If you work overtime and occasionally receive meal money or cab fare home, the amount is tax free. The IRS has not provided a numerical standard for determining when payments are “occasional.”

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