Here are 5 employee benefits with great business tax advantages

It’s no secret that companies offering employee benefits have an advantage in recruiting and hiring top talent and also get some business tax advantages.

The trick is determining the benefits that align with employee needs while providing tax breaks worth the additional expense.

That’s what today’s post will focus on so you can get a better idea if your employee benefit package is helping your employees and your bottom line.

Let’s start with the top benefits.

Health Insurance

This is the granddaddy of them all. Employee health benefits have been in the news for decades, fueled endless political dialogue, and been the difference between gaining and losing talent. One of the reasons it’s popular is because premiums paid can be tax deductible for a business. Also, employees can use pre-tax dollars for contributions, reducing their tax burden.

Retirement plans

Employer contributions to many plans are tax deductible, making it easier to offer matching contributions for employees.

Health Saving Accounts (HSA)

Health Savings Accounts are growing popular, and all employer contributions are tax deductible. Employees can also contribute pre-tax dollars, and their HSA offers tax-free growth and withdrawals for qualified medical expenses.

Flexible Spending Accounts (FSA)

If HSAs don’t work out for your employees, an FSA might. It’s another medical savings account that offers tax benefits for employers and employees alike. Just be aware that you can’t offer an HSA and medical care FSA that pays for the same expenses as the HSA.

However, you can offer an HSA and a dependent care FSA. This type of FSA lets employees contribute pre-tax dollars for eligible expenses in taking care of a dependent. Since this reduces the employee’s taxable salary, the employer pays less in payroll taxes, FICA taxes, unemployment insurance, and workers’ compensation.

Education Assistance Programs

Offering education assistance is a potential tax break, too. Employers can deduct up to $5,250 per year per employee. That benefit is tax-free for the employee, too.

All these benefits can help, but don’t enter into them without a plan that integrates into your tax strategy. Here are a few things you’ll want to consider when putting together an employee benefit package.

Budget

Everything starts with the bottom line. It’s easy to get caught up in taking care of employees and trying to get the best ones possible.

However, if you put the business in financial jeopardy, everyone loses. Get with your bookkeeper or CPA and determine which benefits provide the best bargain for you and your employees.

Don’t forget to factor in the complexity of administration. If a benefit is so complicated it requires additional resources to implement, then factor that into the bottom line.

Also, take time to understand the tax implications of the benefits offered. Tax savings may not be your primary goal in offering benefits, but knowing how much each kind of offering helps makes you a savvier entrepreneur.

This isn’t an easy task, so consult with a tax professional.

Communication, Education, and Employee Preferences

Communicate regularly with employees to find out what benefits they value the most. If you can afford to implement them, be sure to develop a communication strategy to explain benefits to employees in a clear and understandable way.

The Bottom Line

There are many reasons to offer employee benefits; hopefully, this post got you thinking about how you can help your employees while you help your business. But don’t just think about it! Get with a tax professional to find out more about these benefits and how they can help you and your employees reduce your respective tax burdens.