Today TaxMama hears from Joe in Maryland with an interesting problem. “I have been offered a great job but I am a little concerned about having to move from my home to the home that is owned by the company that wants to hire me. I will be required to reside in the company home for two years. The rental fair market value will be added to my W-2 income. My concern is about how much will be added to this income. The home is valued over million.
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The company wants me to live there to entertain clients and to occasionally meet with clients at that residence. What should I expect as far as additional income being added to my W2?”
Dear Joe,
If your company is offering you a job that includes a $4,000,000 home, then they are also offering you a pretty hefty salary.
RUN, don’t walk to the nearest experienced tax professional BEFORE accepting the job. Have the tax pro review the information about the housing costs added to your compensation. Be sure your tax pro is extremely diplomatic, so s/he can speak with your company’s compensation folks about this arrangement.
There is a loophole in the law.
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When an employee is living in a company-provided home for the benefit of the employer, the value is not income to the employee.
https://www.irs.gov/publications/p15b/ar02.html#en_US_publink1000101811
Since you have no choice at all and must live in the home, there may be a way to entirely avoid adding the cost to your payroll – or at least to reduce the amount they add based on the number of days they expect you to be showing off the home (meetings, entertainment, etc.) to clients or prospective clients.
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Without this, the added income will be hefty.
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The best way to know how much they will add to your wages for rent is – to ask them! Or have your tax pro get all the numbers for you to compute what the extra tax hit will be.
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Remember, you will be paying no rent. So take into account what you would have paid if you had the right to chose your own residence.
And remember, you can find answers to all kinds of questions about lodging for the benefit of the employer and other tax issues, free. Where? Where else? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips.com :: The number ONE free tax podcast online
- IRS Publication 15b :: Fringe benefits for employees
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