For example, employee discounts or other employee fringe benefits such as free parking may be excluded because of the administrative problems that the Internal Revenue Service would have in identifying and valuing such items. This doesn't mean they can't be taxed but that the IRS has decided not to tax such items because of their administrative complexity. (Although complexity never impeded the taxation of other items. I, however, will bow to the better judgment of the IRS whenever it decides not to tax something!)

This and a subsequent column will examine the various exclusions that are available and how to take advantage of them. I want to start here with alternatives to earned income. If you are in the 28 percent bracket, each dollar you convert into excludable income is the equivalent of getting a raise on that dollar of 31 percent! Therefore, in negotiating compensation, you as an employee-taxpayer should examine the following forms of nontaxable remuneration for services rendered as an alternative to fully taxable cash income.

Marginal Tax Rates
Filing status	Adjusted gross income	Marginal federal tax rate
Single	$0 to $24,650	15 percent
	$24,651 to $59,750	28 percent
	$59,751 to $124,650	31 percent
	$124,651 to $271,050	36 percent
	$271,051 or more	39.6 percent
Married filing jointly	$0 to $41,200	15 percent
	$41,201 to $99,600	28 percent
	$99,601 to $151,750	31 percent
	$151,751 to $271,050	36 percent
	$271,051 or more	39.6 percent
Married filing separately	$0 to $20,600	15 percent
	$20,601 to $49,800	28 percent
	$49,801 to $75,875	31 percent
	$75,876 to $135,525	36 percent
	$135,526 or more	39.6 percent
Head of household	$0 to $33,050	15 percent
	$33,051 to $85,350	28 percent
	$85,351 to $138,200	31 percent
	$138,201 to $271,050	36 percent
	$271,050 or more	39.6 percent

Medical insurance premiums paid by your employer, are excluded from your income. For example, if you normally would purchase medical insurance costing $1,000 a year, and you are in the 31 percent bracket, you would require pre-tax earnings of $1,449 ($1,449 x .69 = $1,000) in order to make that purchase. Of that $1,449, 31 percent or $449 would go toward taxes. In other words, if your employer pays the $1,000 hospitalization premium ($1,000) for you, it's the equivalent of receiving compensation of $1,449 from your employer and then paying your own hospitalization premium. This doesn't even take into account the savings in state taxes, Social Security and Medicare you get by not paying it yourself.

Group term life insurance coverage of $50,000 or less provided to you by your employer is excluded from your income. Group term life insurance is term insurance protection provided under a master policy or a group of individual policies. The policies must be life insurance contracts and form part of a plan of group insurance arranged by an employer for all employees. Permanent insurance, such as a whole life, universal or variable policy, is not term life insurance protection.

Where the policy provides only term insurance of $50,000 or less, the payment of premiums by your employer does not create any taxable income to you. However, the cost of insurance protection in excess of $50,000 paid by your employer is taxable income.

Uniform premiums for $1,000 of group term life insurance protection
Age	Amount included in income
Under 30	$0.96
30-34	$1.08
35-39	$1.32
40-44	$2.04
45-49	$3.48
50-54	$5.76
55-59	$9.00
60-64	$14.04
65-69	$25.20
70 and older	$45.12

For example, assume you are 47 and your employer carries a group policy that provides you with $60,000 worth of term life insurance. The rate for a person that age is $3.48 per $1,000 of group term insurance that exceeds $50,000.You therefore must pay $34.80 ($3.48 x 10) in your income from your employer's payment of premiums. The rest of the premium is tax-free income. Had you contributed $34.80 toward the purchase of the insurance, you would have had zero included in your income.

If two or more employers provide you with group term life insurance coverage, the same rules apply. You've got to add the two policies and report as income the amount that exceeds the $50,000 threshold. For example, assume you're 51 and work for two employers who both provide coverage for you. The first employer carries a $35,000 policy on you and the second has a $45,000 policy. You end up paying $122.80 as income ($45,000 + $35,000 = $80,000 -$50,000 (maximum allowed) = $30,000 x $5.76 (premium for age) = $172.80 - $50 (premiums you pay) = $122.80.)

The cost of group term life insurance provided by an employer is included in wages for FICA (Federal Insurance Contributions Act), or Social Security, purposes to the extent that it is included for income tax purposes. However, if you need insurance, the use of this technique provides that insurance at either a tax-reduced or completely tax-free cost.