Taxable Fringe Benefit Law and Legal Definition

A taxable fringe benefits are certain noncash fringe benefits received from an employer whose value are considered part of an employee's compensation. An employer generally must withhold income tax on these benefits from an employees regular pay for the period the benefits are paid or considered paid. Anytime an employer provides an employee a fringe benefit, that fringe benefit is subject to federal income taxes unless the law specifically excludes it.

For example, Work clothing that is provided by the employer is not taxable if the employee must wear it as a condition of employment and the clothes are not suitable for everyday wear. It is not enough that the employee wears distinctive clothing, nor is it just enough that the employee does not wear the clothes outside of work. The employer must specifically require the clothing, and the clothing must not be suitable to take the place of regular clothing. For example, the cost and upkeep of work clothes for firefighter, police officers and health care workers would not be taxable. A police detective’s suit jacket is suitable for everyday wear, and therefore, is taxable.