{"id":12286,"date":"2021-05-31T14:00:00","date_gmt":"2021-05-31T14:00:00","guid":{"rendered":"https:\/\/www.wellable.co\/blog\/pulse-check-a-crash-course-in-the-taxability-of-wellness-incentives\/"},"modified":"2025-02-04T11:28:37","modified_gmt":"2025-02-04T16:28:37","slug":"pulse-check-a-crash-course-in-the-taxability-of-wellness-incentives","status":"publish","type":"post","link":"https:\/\/www.wellable.co\/blog\/pulse-check-a-crash-course-in-the-taxability-of-wellness-incentives\/","title":{"rendered":"Pulse Check: A Crash Course in the Taxability of Wellness Incentives"},"content":{"rendered":"\n

Many employers offer wellness<\/span><\/span><\/span> incentives<\/span><\/span><\/span><\/span><\/a> to encourage employees to engage in wellness programs and adopt healthy behaviors<\/span>. Often,<\/span> these incentives are monetary (e.g.<\/span>, direct payments<\/span> or items <\/span>with<\/span> fair market value). Most<\/span> monetary incentives are taxable, but this may not appear obvious to companies due to the complexity of<\/span> federal guidelines<\/span>. This raises the question:<\/span> how many organizations are appropriately <\/span>taxing their wellness program incentives?<\/span><\/span><\/p>\n\n\n\n

Survey results: Are wellness incentives being taxed? <\/h2>\n\n\n\n

To answer this, Wellable surveyed human resources and wellness professionals subscribed to the Wellable Weekly newsletter. Sixty percent said yes, while 40% said no. <\/p>\n\n\n

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\"40%<\/figure><\/div>\n\n\n

Given that many wellness incentives are taxable, the results probably shouldn\u2019t be so divided. Some organizations might need of a crash course on the taxability of wellness incentives. To address this, Wellable offers a decision tree that provides US companies with a series of questions to determine if a particular incentive is taxable. Once the decision tree is laid out, additional information is provided to simplify the process of answering its questions. <\/p>\n\n\n

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\"Decision<\/figure><\/div>\n\n\n

Taxable Wellness Incentives <\/h2>\n\n\n\n

Cash and Cash Equivalents <\/h3>\n\n\n\n

Cash equivalents include other assets that are readily convertible into a pre-specified amount, like a $100 gift card. As is noted in the decision tree above, these incentives are always taxable.<\/p>\n\n\n\n

Nontaxable Wellness Incentives<\/h2>\n\n\n\n

Eligible Medical Expenses <\/h3>\n\n\n\n

According to the sections 105<\/a> and 106<\/a> of the IRS code, medical care expenses paid either by an employee or their employer are nontaxable. Section 213(a)<\/a> states that:\u00a0<\/p>\n\n\n\n

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Medical care includes<\/strong> amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.<\/p>\n

[Medical care] does not include<\/strong> cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.<\/p>\n<\/div>\n\n\n\n

Some examples of nontaxable medical expenses may include:<\/p>\n\n\n\n