Taxable Income

[whkrueg]

I have a new client who is an apartment manager, he receives his rent for free. Is that free rent taxable income? It does not reflect it on his W2 in box 1,2, or 3. But it does show it under box 18 Local wages, where his employer put the Calfornia SDI i/o box 14.

The income shown in box 18 is more than listed in box 1, 2, or 3. Apparently his employer has been creating his W2 this way for years and this client has been filing it that way.

I just want to be sure this employer is not under reporting his income. If it is not taxable, then at least this client and his employer should have to pay their share of SS and Medicare tax on it.

Thanks
Wayne

[JG EA]

Pub 525 has this information:

You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met.

The meals are:

Furnished on the business premises of your employer, and

Furnished for the convenience of your employer.

The lodging is:

Furnished on the business premises of your employer,

Furnished for the convenience of your employer, and

A condition of your employment. (You must accept it in order to be able to properly perform your duties.)

I think this applies in this case. I do know that Worker's Comp includes all benefits provided to an employee, even non taxable ones like this that add to the overall "income" to the employee, and that is probably the same with CA SDI.

[Bees Knees]

I agree. Its tax free under Section 119 as lodging when it is furnished on the employer’s business premises.

In Minnesota, the value of a caretaker's apartment that is not taxed for Federal tax purposes must be added back to household income when figuring the rent credit on Form M1PR.

[whkrueg]

Taxable Income

Bees Knees, JG EA,

Thanks for your input. That clarifies the situation for me..

Wayne