Facility managers, rangers, and other property staff often live on the property. How do you, and an employer, determine whether the value of their lodging is taxable?

1. Determine what is taxable. The foundation is simple, “All forms of compensation are subject to income tax unless specifically excluded by the Code.” [General Rule of Inclusion – IRC 61(a)(1)].

2. Determine if all conditions of exclusion are met. From the Employer’s Tax Guide to Fringe Benefits for use in 2012 (written to employers), page 16. This is based on IRC 119.

You can exclude the value of lodging you furnish to an employee from the employee’s wages if it meets the following tests:

• It is furnished on your business premises. For this exclusion, your business premises is generally your employee’s place of work.
  
• It is furnished for your convenience. Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. This is true even if a law or employment contract provides that the lodging is furnished as pay. However, a written statement that the lodging is furnished for your convenience is not sufficient.
• The employee must accept it as a condition of employment. Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging.

This intent of this posting is simply to provide information. Work with your tax adviser, Human Resources expert, legal counsel, and other experts for interpretation in your circumstances and employee contracts and/or lodging agreements, including vacating the premises when employment ceases.

A final note. Property staff may have different circumstances than other employees (directors, activity/program staff, food personnel, etc.).

Resources and references:

Taxable Fringe Benefit Guide 2012. http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf

Employer’s Tax Guide to Fringe Benefits for use in 2012. http://www.irs.gov/pub/irs-pdf/p15b.pdf

IRC=Internal Revenue Code