Free Fringe Benefit Calculators
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Your Business's Gross Profit %
This is your business's overall profit margin from 2024. The IRS uses this to determine how much of a discount can be tax-free.
Find it on your 2024 tax return (Schedule C or corporate return) or ask your accountant.
Typical ranges:
• Retail stores: 30-40%
• Restaurants: 60-70%
• Services: use "Services" tab instead
How this works
The IRS says products can be discounted up to your business's gross profit % from 2024 (0%) tax-free. Give a bigger discount? The extra becomes imputed income. Why? The employee saved real money - that savings has value, just like getting paid. So it gets added to their taxable wages.
Breakdown
Enter values to see breakdown
Can Discounts Exceed IRS-Exempt Limits?
Yes! You can give employees any size discount.
Here's what to know
The IRS doesn't stop you from giving bigger discounts. But part of it might count as taxable income.
Services: Up to 20% off is tax-free
Products: Up to your business's gross profit % (from 2024) is tax-free
Example
Your business's gross profit in 2024 was 40%. You sell a $100 shirt to an employee for $30:
- • You gave a $70 discount
- • $40 is tax-free (up to your 40% gross profit)
- • $30 becomes taxable income for the employee
What this means for you
Give whatever discount works for your business. If it goes over the limit, just send that extra part to payroll. They'll handle the taxes.
Based on IRS Publication 15-B
What Do I Do With This?
Imputed Income to report
$0.00
The employee saved this much - it has value like cash, so it's taxable
What to do now
Tell your payroll company
Send this $0.00 amount to whoever runs your payroll (Gusto, ADP, your accountant, etc.)
They add it as "imputed income"
This gets added to their gross wages on paper. The employee doesn't receive extra cash - it just increases their taxable income for tax withholding purposes.
Taxes come out automatically
Payroll handles all the tax math - federal, state, Social Security, etc. You don't have to do anything else.
That's it!
At year end, it shows up on their W-2 automatically. The IRS is happy, and you're done.
What to tell payroll
Say: "Add $0.00 of imputed income for [employee name] - it's a taxable fringe benefit from an employee discount."
Common payroll codes: IMPUTED INCOME, FRINGE BENEFIT, TAXABLE BENEFIT, or NON-CASH COMP
Reference: IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits