Sorry, Your Tax-Free Gym Benefit Could Soon Be Taxed: Employee Perks the GOP is Targeting in 2025

WDC NEWS 6 STAFF February 18, 2025

5 4 minutes read

Sorry, Your Tax-Free Gym Benefit Could Soon Be Taxed: Employee Perks the GOP is Targeting in 2025

A flurry of activity followed the president into his second term, and with all the noise came something perhaps unexpected: The House Committee on Ways and Means agenda slashing certain tax benefits. The 50-page GOP document, first released by Politico and other news outlets, is seen as a roadmap for funding an extension of the Tax Cuts and Jobs Act (TCJA).

Basically, to pay for the “Trump tax cuts” sacrifices have to be made. According to the document, that could mean getting rid of certain employee benefits amounting to $157 billion over 10 years.

But are the estimated savings worth the price to workers?

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Why is there a threat to eliminate popular tax breaks?

The tax benefits at risk to workers include employer-provided parking, meals, and lodging “fringe benefits.” These items, along with key tax breaks for families and students, could be in jeopardy as the GOP discusses ways to pay for the TCJA moving forward.

So what are “fringe benefits?”

Fringe benefits are perks offered to employees in addition to salary. While salaries are always taxed, not all fringe benefits are taxable on your federal return.

For instance, the below fringe benefits may be partly or fully excluded from your IRS taxable income:

Athletic facilities.
Lodging on business premises.
Meals.
Commutes (transportation benefits).

Some fringe benefits can also be subject to specific rules to qualify for tax exclusion. For instance, on-site gym access cannot be sold to the general public if the facility is tax-free to employees.

Eliminating “work gym” tax-free status

Currently, athletic facilities can be exempt from federal tax as a fringe benefit exclusion. This may be important, considering data show that about a third of organizations provide onsite fitness centers or subsidized gym memberships to employees for reasons like employee morale and physical fitness.

But the proposal to end this exclusion would make on-site gyms taxable to workers.

Who’s affected?

Generally speaking, employees who use the on-site gyms, but all workers at a company may foot the tax bill.

While studies have shown that only 25% of employees regularly access employer-provided facilities, data suggests morale is tied to programs like athletic programs. Taxing employees on these benefits may not only lower morale but also discourage employees from working for companies that offer on-site gyms due to the increased tax liability.

The provision is expected to provide the government $20 billion over 10 years.

Parking costs for work may be eliminated

Some employer-provided transportation benefits can be excluded from employee income up to a certain amount:

Bus, subway, and similar transit passes.
Parking near or on your company’s premises.

However, the proposal in the list of tax cuts eliminates this exclusion, which means you could see an increase in your future tax liability.

How much?

For tax year 2025, taxpayers can exclude up to $325 per month of qualified employer-provided transportation benefits. Per taxpayer, that’s $3,900 in potential tax liability previously excluded.

The proposal is estimated to save $50 billion in spending over 10 years.

Note: Ending the tax exclusion on employer-provided transportation may not include de minimis travel. “De minimis” means something is considered low in value and frequency, like occasional local office visits. This type of travel may remain tax-free under the proposal.

Are employees taxed on employer lodging?

Currently, employees are not taxed on employer-provided rooms if the lodging is:

On business premises.
For the employer’s convenience.
A condition of employment.

Employees like hotel managers, construction workers, and housekeepers may rely on employer-provided housing to do their jobs. However, that could change if the tax exclusion for lodging goes away, as outlined in the House agenda.

If employer-provided lodging becomes taxable, affected taxpayers may see their future tax bill climb hundreds of dollars (depending on how long and how often they live on a job site). But the proposal does not affect military personnel.

Is employer-paid travel taxable?

Amid all the proposed tax benefit cuts, there may be a silver lining: Business travel. Traveling for business usually qualifies for “working condition fringe benefits” which is not listed on the chopping block for tax proposals. A few potential examples are below:

Airplane travel.
Company vehicles.
Hotel stays (non-local).

Gas mileage reimbursement may also be safe from elimination. The 2025 gas mileage tax rate is $0.70 and there is no proposal in the Republican agenda to eliminate the tax-exempt status of this provision either.

Meals may become taxable to employees

Some employees receive meals tax-free if they are for the employer’s convenience and “on-premise.”

Under current IRS guidelines, on-premise meals may include:

Food provided to service workers, like waitstaff and similar employees.
Meals for emergency call workers, like hospital staff.
Bankers and others who can only eat in “short meal periods.”

However, these workers and others could see their meals become taxable. The House proposal to eliminate the exclusion of lodging and meals is estimated to bring in $87 billion over 10 years. Military personnel would be excluded from this elimination.

Note: Ending the tax exclusion on employer-provided food may not include de minimis meals. “De minimis” means something is considered low in value and frequency, like occasional coffee and doughnuts. So, these types of meals may remain tax-free under the proposal.

Tax cut proposals in 2025

While popular tax breaks are in danger, other proposals could lower your tax bill next year.

For example, President Trump is seeking to end taxes on overtime, a provision that could affect millions of taxpayers. There is also a provision affecting the taxability of tips in this day and age where tips range from 5% to 30%.

Both proposals are reflected in the Committee on Ways and Means agenda. However, neither these nor any of the other proposals on this list are certainties, as the Republican-controlled House considers different options for soon-to-be-decided tax policy.

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