Fringe Benefits: Fringe benefits are compensation or other benefits from your employer that are not in the form of cash. They can include items such as accident and health plans or group-term life insurance. Fringe benefits often deliver double benefits. Not only does your employer foot all or part of the cost, but the value of many of these benefits comes to you tax-free. Even when that value is included in your taxable income, you come out ahead. Assume, for example, that your firm has a vacation resort that you can use free of charge. If you take advantage of such generosity, the law states that you include in taxable income the fair market value of the accommodations. If the value is set at $1,000 for your two-week stay, for example, an extra $1,000 will be included in your taxable wages on your W-2 form for the year and you must pay tax on the extra "income." For someone in the 28 percent tax bracket, the tax cost of the vacation would be $280 (28 percent of $1,000). That's a good deal, compared to the $1,000 it would have cost you otherwise. But it's even better than it appears. If you had to pay the $1,000 out of pocket, it would really cost you more because you'd be spending after-tax dollars. In the 28 percent bracket you must earn $1,389 to have $1,000 left after the IRS gets its share. Your employer usually figures the taxable amount of any fringe benefits and includes the value in your wages on Form W-2. Common tax-free fringe benefits include the first $50,000 of group-term life insurance, educational assistance plans, health care coverage, and adoption assistance plans. If your employer has a cafeteria plan or flexible spending arrangement, you can use part of your wages to pay for certain expenses and reduce the amount of wages that are taxed.