Key Takeaways
- Achievement awards must be tangible personal property (no cash/gift cards).
- Limits: $400 (non-qualified plan), $1,600 (qualified plan).
- Adoption assistance exclusion (Tax Year 2024): $16,810.
- Group-term life: first $50,000 tax-free (Table I for excess).
- Athletic facilities: on-premises, employer-operated = tax-free.
- Length of service: Not in first 5 years, not more than once per 5 years.
Last updated: January 2026
Achievement Awards & Other Benefits
Why This Matters for the Exam
Achievement awards and group-term life insurance rules are frequently tested. Know the property requirement, dollar limits, and length-of-service rules.
Expect at least 2-3 questions on these benefits.
Employee Achievement Awards (§74(c))
| Requirement | Rule |
|---|---|
| Form | Tangible personal property only |
| Presentation | Meaningful ceremony |
| Cash/gift cards | ALWAYS taxable |
Award Categories
| Category | Special Rules |
|---|---|
| Length of service | Not in first 5 years; not more than once per 5 years |
| Safety achievement | Not to managers/clerical; not >10% of eligible employees |
Dollar Limits
| Plan Type | Maximum |
|---|---|
| Non-qualified plan | $400/year |
| Qualified plan | $1,600/year |
| Qualified plan requirements | Written, nondiscriminatory |
Examples: Taxable vs. Excluded
| Award | Treatment |
|---|---|
| $300 watch (10 years service) | Excluded |
| $50 gift card (safety) | TAXABLE (cash equivalent) |
| $1,200 golf clubs (qualified plan) | Excluded |
| $200 engraved plaque | Excluded |
Adoption Assistance (§137)
| Element | Tax Year 2024 |
|---|---|
| Maximum exclusion | $16,810 |
| Phase-out begins | MAGI >$252,150 |
| Phase-out complete | MAGI >$292,150 |
Group-Term Life Insurance (§79)
| Coverage | Treatment |
|---|---|
| First $50,000 | Tax-free |
| Excess coverage | Taxable (Table I rates) |
| HCE with discriminatory plan | Entire value taxable |
Table I (IRS Uniform Premiums)
| Age | Monthly Cost per $1,000 |
|---|---|
| Under 25 | $0.05 |
| 25-29 | $0.06 |
| 30-34 | $0.08 |
| 35-39 | $0.09 |
| 40-44 | $0.10 |
| 45-49 | $0.15 |
| 50-54 | $0.23 |
| 55-59 | $0.43 |
| 60-64 | $0.66 |
| 65-69 | $1.27 |
| 70+ | $2.06 |
Group-Term Life Example
| Item | Calculation |
|---|---|
| Coverage | $150,000 |
| Excluded | $50,000 |
| Excess | $100,000 |
| Employee age | 50 |
| Monthly cost (Table I) | $0.23 per $1,000 |
| Taxable income/month | $0.23 × 100 = $23 |
| Annual taxable | $23 × 12 = $276 |
Other Common Exclusions
| Benefit | Requirements |
|---|---|
| Athletic facilities | On-premises, employer-operated |
| Meals (business convenience) | On-premises, for substantial business reason |
| Moving expenses | Military only (no civilian exclusion) |
Real-World Scenario
Scenario: Employee receives $1,500 watch for 15 years of service under a qualified written plan.
- Tangible property: Yes.
- Length of service: OK (>5 years, first award in >5 years).
- Qualified plan limit: $1,600.
- Result: Fully excluded (under $1,600 limit).
On the Exam
Expect 2-3 questions on these benefits, typically:
- Award Questions: "Which award is taxable?"
- Life Insurance Questions: "How much group-term life is tax-free?"
- Adoption Questions: "What is the 2024 adoption assistance limit?"
The key is to remember: Awards = tangible property only, $400/$1,600 limits. Life insurance = first $50,000 free. Adoption = $16,810 (Tax Year 2024). Gift cards = always taxable.
Test Your Knowledge
Which achievement award is TAXABLE?
A
B
C
D
Test Your Knowledge
How much group-term life insurance is tax-free?
A
B
C
D
Test Your Knowledge
Tax Year 2024 adoption assistance exclusion maximum?
A
B
C
D