Question:
Are we required to tax the value of housing provided to an employee as wages?
Answer:
When the employee is not required to live in your apartment but is given the option and chooses to do so, the value of the rent is included in the wages and taxed. So, if he makes $3000/mo and the value of the rent is $1000, you will tax him based on $4000.
Do you offer a choice between additional pay or housing to your employees? If so, the lodging is taxable because there is a choice.
The IRS allows employers to exclude the value of lodging in three specific circumstances:
- Housing is on business premises
- Lodgings are offered for the employer’s convenience
- Employees must accept housing as a condition of employment
If the employee is not given an option and living in the apartment is a condition of employment, the lodging is not taxable as wages.
https://www.irs.gov/publications/p15b
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