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Expense reimbursement is always tax-free for the employee and fully deductible for the company, whereas any increase in compensation from $100k-$150k can carry an effective tax rate over 50% due to progressive marginal rates and phase-outs.

Particularly for these types of ambiguous use items, I would expect savvy companies to be maximizing this benefit, not minimizing it.




In Europe it is common to provide car and petrol. However from some point it is perceived as a benefit and taxed.


The cost for an employer gets cheaper as an employee makes more money, not more expensive. There are no increasing marginal rates for employer payroll taxes- just the employee state/federal income taxes.


It depends how you measure the cost to the employer. When you're talking about increasing employee compensation in the $100k - $150k range, I look at the total cost to end up with $1.00 in the employee's savings account. The point is that increasing compensation is extremely inefficient in the $100k - $150k range. That's why, for example, US engineers getting raises in that pay range will often find it doesn't change much in their living situation. "I got a $10k raise" but really take-home pay just increased $4500.

Often times paying out compensation in cash like this is just too expensive. It's a weird concept that the cost of cash is a curve mostly dictated by tax rates. When the IRS is taking 55% at certain points in the curve, you get much bigger bang for the buck by offering other benefits, like maximizing expense reimbursements. (phone, internet, qualified commuting expenses, food & entertainment, etc.)




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