Tax Facts

Are Employer-Provided Cell Phones Taxable Income?

Many employers consider providing employees cell phones and other equipment. Those employers should know that benefits like employer-provided cell phones can be classified as nontaxable fringe benefits if they are provided primarily for noncompensatory business purposes. For example, if the employer requires the employee to be reachable by the employer and/or clients at all times when the employee is out of the office, that can constitute a noncompensatory business purpose. On the other hand, if the benefit is provided to attract employees, boost morale or add to the employee's compensation, the benefit will be taxable. Similar analysis applies if the employer chooses to reimburse the employee for cell phone expenses. As long as the noncompensatory business purpose test is satisfied, the benefit is not taxable even if the employee also uses the phone for personal purposes at times. For more information on the tax treatment of de minimis fringe benefits, visit Tax Facts Online. Read More

: Link to Q8910.


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