Under various provisions of the tax code, your company can provide tax-free benefits to employees as long as certain "nondiscrimination" requirements are met.

For example, your company may pay health insurance and group term life insurance premiums on behalf of the employees. The value of the health insurance coverage and the first $50,000 of group term life insurance coverage is tax free to the employees, and the premiums are deductible by the company. However, statutory fringe benefits provided to the owners of pass-through entities are generally taxable.

A benefit qualifies as a working-condition fringe benefit if the employee would normally be entitled to deduct the cost as an "ordinary and necessary" business expense. For example, the use of a company car for business travel is a qualified expense and a tax-free benefit for S corporation owner or a partner.

DE MINIMIS BENEFITS –Any property or service with a relatively low value is excluded from tax on employees – including owners and partners. This includes occasional meals or supper money, local transportation when working late, holiday or birthday gifts, occasional sporting event tickets and traditional awards.

DEPENDENT CARE ASSISTANCE - You can take advantage of the annual exclusion of up to $5,000 paid under your company’s dependent care assistance plan. No more than 25% of the amounts paid or incurred during the year can go to shareholders or owners with an interest of more than 5% in the company.

EDUCATION ASSISTANCE PLANS - You can benefit from the annual tax exclusion of up to $5,250 of employer-paid educational assistance, whether or not the education is job-related. In this case, no more than 5% of the cost of the annual benefits may go to those individuals owning more than 5% of the company.

ATHLETIC FACILITIES - If you can build a gymnasium on the premises, you can limit the use of the facilities to the top brass and still qualify for tax exclusion. However, if you want to deduct the cost of the facility, you must make it available to all employees.

TRANSPORTATION BENEFITS – Employees are entitled to a tax exclusion of up to $185 per month for free parking and up to $100 per month for transit passes for bus, train or van-pool rides. This tax-free benefit is not available to owners of pass-through entities. However, under the rules for de minimis benefits, tokes or fare cards are tax-free to S corporation owners and partners if the value doesn’t exceed $21 per month.

Even if a fringe benefit is taxable to an S corporation owner, it’s still deductible by the company.