Whether you have your own business or you work for someone else, it makes all the sense in the world to take advantage of employee benefits. The government allows most businesses to set up plans to pay for certain costs (the most popular plans are related to health insurance and child-care costs). Usually a portion or all of these costs are passed on to the employee through reductions in their pay. The reduced cost lies in the income tax savings. The amount that your employer is reducing your pay is not subject to income tax. For example, someone in the 25% tax bracket would pay $7,500 for a particular benefit that normally costs $10,000. The overall income tax savings depends on your tax bracket. And this does not include any potential state income tax savings.
When changing jobs, we often put a great deal of focus on the salary. However there is so much more that you may be receiving than just a paycheck. Some of the employee benefits you are offered have a monetary value, even though it's not calculated for you. Also, if you're considering leaving a job, don't forget to account for the benefits you may be giving up—they may be more valuable than you realize.
Some major employee benefits you should maximize and evaluate:
You can receive up to $5,000, pre-tax, as long as you are using a qualified care provider.
Some employers will reimburse you for public transit costs (up to $115 for 2008). It is not taxable to you, because it is considered a tax-exempt fringe benefit.
One important item to take into account, before resigning from a job, is the vesting time for your 401K and your Pension plans. If you are close to advancing from 50% vesting to 100%, you may want to reconsider the timing of your job change, or you can calculate that amount to use in negotiating additional benefits with your potential new employer. These amounts could turn out to be very substantial. Also, it's a good idea to review with your prospective new employer how much they match and what there vesting period is?
Questions to ask a prospective employer:
- How much of the premium do I have to pay?
- What about co-pays?
- How easy is it to have access to specialty doctors?
- What about coverage for dental plans?
- Do you offer a vision plan?
- Will I be able to set aside pre-tax dollars for out-of-pocket medical expenses?
Does your company give a 15% discount on the purchase price? Do they use the lowest price over a set period of time? This definitely increases the likelihood of making a profit and minimizes your risk.
Are they incentive stock options or nonqualified stock options? Each has different income tax implications.