Free Fringe Benefit Calculators
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Highly Compensated Employee (HCE) Check
For 2026, an HCE is an employee who earned over $160,000 gross pay (before taxes) in 2025.
How this works
For services, employees can save up to 20% tax-free. Anything beyond that is like extra pay—it counts as imputed income and gets added to their W-2.
Breakdown
Enter prices to see your tax 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 2025) is tax-free
Example
Your business-wide gross profit in 2025 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% business-wide gross profit)
- • $30 becomes taxable income for the employee
Key point: The 40% comes from your overall business, not the individual item. Whether this shirt costs you $20, $30, or $40 to make, the tax-free limit is still $40 (40% of the $100 customer price). The IRS uses your company-wide gross profit from your 2025 P&L or tax return.
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
Reference: IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits