The Tax-Smart Approach to Staff Housing

I cringe every time I see “Housing Optional” or “Housing possibly included” in ads for grooms, barn managers, and other horse-farm staff. Not because staff housing at the farm is a bad idea. Because housing that’s *optional* is taxable to the employee. Yep, the IRS expects you to add the rental value of the room or house your employee occupies to the income on their W2 at the end of the year. And expects them to pay tax on it.

However, it does not have to be that way. If you structure your jobs right, that same housing can be a tax-free benefit for your employee, without costing you a penny more. Win-Win.

There are three conditions you must meet to offer your people tax-free housing:

1) It must be on your “business premises”. Roughly that means on the same property where the employee works. A barn apartment or a house on the farm property qualifies. A house on a neighboring farm or in the nearest town—sorry, doesn’t qualify.

2) It must be “for the employer’s convenience”. Any groom who does late night stall checks in her pajamas or farm manager who has had to shut off a broken water pipe at 2 am knows this criteria is easily met on most horse farms.

3) Living there must be a requirement of the job. This is the one that trips up far too many farm owners and trainers. And why I cringe at the advertisements that give the IRS published proof that your offering doesn’t meet this criteria for favorable tax treatment.

Since most horse farm jobs don’t have a huge salary attached, tax versus no-tax on the value of the housing you provide could make a real difference in your employees’ quality of life, and likelihood to stay with you long-term. Which makes it well worth your while to invest in properly designing your jobs so they qualify for this pro-horse loophole in the law. Stable Books is ready and willing to help.

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