You work hard for your paycheck, but are you taking advantage of all you can from your job? There are often employer benefits that employees may overlook in utilizing. Did you know that many employers offer non-taxable benefits that can increase your quality of life without increasing your tax bill? Here are a few tax-savings examples from our CPA firm which can help you and your family to reduce your tax burden.
Are you a working parent?
Dependent care assistance is a special benefit to help a working parent pay for the cost of daycare. You, as an employee under this plan can elect to have up to $5,000 of your pre-tax salary placed into a Dependent Care Reimbursement Spending Account to pay for your child’s costs.
Example: Living in the city of South Pasadena, and having a taking your child to a reputable daycare provider is expensive. Your $5,000 of salary after taxes (taxed at 25%) would provide $3,750 to pay for daycare. However, your Altadena employer offers dependent care assistance program, therefore the entire $5,000 can be excluded from your gross income is available to pay for child care. You just saved $1,250!
A few rules apply but it is worthwhile to check with your employer’s benefits coordinator to see if this benefit is available.
Are you going to night school?
Education is a great way to enhance your career and increase your earning potential. Many employers provide Educational Assistance Program, a type of tax free fringe benefit for their employees. Your employer can make a direct payment to your school or reimburse you of up to $5,250 for tuition, books, and fees you have incurred for taking classes towards your degree or a certification program. Some good news! The payment is excluded from your taxable income and is available every year for you to take advantage of this employer provided benefit.
Example: You are studying towards your MBA at University of Southern California (USC). You are attending the PM program which will take three years to complete from start to finish. During this time, you are also employed at a tech firm in Santa Monica which offers the Educational Assistance Program.
Since you took advantage of this benefit, you just saved $15,750 from your hefty tuition bills. Isn’t this great? Less to worry about, not to mention the thousands saved from student loan payments!
Employee benefits offer a great way to increase your quality of life without increasing your tax bill. In fact, some of these benefits will reduce your taxes! All of these benefits are governed by complex rules and regulations which can change from year over year. At MiklosCPA, we have helped businesses with their tax and accounting questions using our “virtual office” services. If you want to learn more about us, give us a call!
If you found this this tax tip useful, share it with your family and coworkers! All of us can benefit from some tax planning and exploring available benefits. Also check our site and social media pages for future articles. We post new articles periodically.