Wellness programs provide great ways to motivate employees to get active. Usually, they involve reimbursing an employee for their fitness membership costs, or providing them monetary wellness incentive rewards for exercising. But when setting up a program like this, you might wonder what the tax costs will be. Will you have to count this reimbursement as taxable income? Fortunately, there are at least four ways to provide a tax free wellness program.
Give the money to a charity. Employees will exercise or go to the gym, and the employer will donate the money earned to a charity of the employee’s choice. Then, charitable donations can be written off on the company’s taxes as a charitable donation. IncentFit offers a seamless charitable donations program where employees can select from major charities and earn wellness benefits toward a charitable contribution. Currently, IncentFit is the only wellness provider to offer a charitable donations program.
Health Insurance Contributions
Pay part of the employee’s health insurance costs. Imagine a case where the employee’s Insurance premium is $150 per month. The employee pays $100 per month for their insurance, and the employer pays the $50 remainder. Next, imagine the employee earns a $20 wellness reward. In this case, the employer would then only deduct $80 from the employee’s pre-tax income, and cover the other $70 of the premium.
Contributions to an FSA or HSA
Put the gym reimbursement in an employee’s HSA or FSA. A Health Savings Account (HSA) or a Flexible Spending Account (FSA) are both great options for employers seeking to provide tax free reimbursement for medical costs. Employers can pay into these accounts based on wellness activity or the cost of the employee’s gym membership. The employee earns the credit, and the company deposits it directly into the account, tax free. Check out this mini guide on health savings accounts, and your wellness program.
De minimis Fringe Benefits
Small prizes and gifts can be given tax free. Employers do not need to report any small non-monetary rewards as taxable income. That means those occasional t-shirts, water bottles, and even fitness trackers for your step challenge winner are tax exempt! But, remember, if you make a habit of it, you’ll need to report the total cost of these items.
Still have questions? Not sure what your wellness program or gym reimbursements should look like? IncentFit has years of experience helping companies institute the best wellness programs at great prices.