The Busy Summer Travel Season Officially Kicks Off: Remember the IRS No-Additional-Cost Services Rules

Many businesses that provide services allow their employees to use those services for free or at a discounted rate (typical examples include hotels, event sponsors, airlines, etc.). The employee receiving the fringe benefit can exclude the value of those services from income if they qualify under the IRC Section 132(b) "no-additional-cost service" rules. No-additional-cost services are those that (1) the employer offers to customers (not primarily to employees) in the ordinary course of business, (2) the employer also offers to employees for personal use, (3) are offered by the same business line in which the employee is working, and (4) do not cause the employer to incur significant extra costs when given to employees, also considering the employer's lost revenue. However, the exclusion may not be available in situations where the services are only offered to highly compensated employees and are thus deemed to be discriminatory. For more information on the rules governing no-additional-cost services, visit Tax Facts Online. Read More: Link to Q8905.