Decoding Job Perks: The Real Cost of "Free" Benefits
TL;DR: When it comes to job perks such as gym reimbursements or free lunch, it's essential to understand that these are considered taxable benefits. This means you're actually paying taxes on these 'free' perks. By understanding this, you can better analyze job offers and determine the real value of these benefits.
When evaluating job offers, perks like a gym reimbursement or free lunch often look like great additions. However, it's important to remember that the Canada Revenue Agency (CRA) sees these perks as taxable benefits.
Let's look at an example. Say you have two job offers:
One pays $51,000 with no benefits.
The other pays $50,000 but includes a $2,000 gym reimbursement.
If you plan to spend $2,000 at the gym, the second offer might seem better. However, if you were planning to spend less than $1,000 at the gym, you're financially better off with the first offer. Essentially, it's the same as if the company paid you an extra $1,000, which you then used to pay for your gym membership.
Another popular job perk is free lunch. While the idea of a complimentary meal every day might sound great, it's important to understand that this is a taxable benefit. If your company provides lunch worth $20 a day, you'll be taxed on that $20.
So, should you accept the free lunch? If your employer gives you a choice, here's how you should look at it: assuming a tax rate of 30% and a taxable benefit of $20 a day, you're paying $6 in additional tax for the free lunch. You essentially need to determine if the $6 cost of the free lunch is worth it to you.
In conclusion, it's crucial to analyze job offers with a clear understanding of the real cost of these 'free' perks.
Remember, tax planning and decision-making can be complex, and it's always wise to seek professional advice. If you need help navigating the tax implications of your employment benefits or any other tax-related matters, reach out to us at Tax Heroes. We're here to guide you through the intricacies of tax planning to help you maximize your savings. Contact us today!
