17.6 Achievement Awards & Other Benefits
Key Takeaways
- Achievement awards must be tangible personal property (no cash or gift cards).
- Dollar limits: $400 per employee/year (non-qualified plan) and $1,600 (qualified plan).
- §137 Adoption assistance exclusion (2025): $17,280; phase-out MAGI $259,190 – $299,190.
- Group-term life insurance: first $50,000 of coverage is tax-free; excess valued using Table I.
- Athletic facilities: on-premises, employer-operated and primarily for employees = tax-free.
- Length-of-service awards: not within first 5 years and not more than once every 5 years.
Why This Matters for the Exam
Achievement awards and group-term life insurance rules are frequently tested. Know the tangible-property requirement, dollar limits, length-of-service rules, and the 2025 adoption assistance figures.
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 / cash equivalents | 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/admin; not to >10% of eligible employees |
Dollar Limits (Tax Year 2025 — statutory, unchanged)
| Plan Type | Maximum |
|---|---|
| Non-qualified plan | $400/year per employee |
| Qualified plan | $1,600/year per employee |
| Qualified plan requirements | Written, nondiscriminatory |
Examples: Taxable vs. Excluded
| Award | Treatment |
|---|---|
| $300 watch (10 years service, non-qualified) | Excluded |
| $50 gift card (safety) | TAXABLE (cash equivalent) |
| $1,200 golf clubs (qualified plan) | Excluded |
| $200 engraved plaque | Excluded |
Adoption Assistance (§137) — Tax Year 2025
| Element | 2025 Amount |
|---|---|
| Maximum exclusion | $17,280 |
| Phase-out begins | MAGI > $259,190 |
| Phase-out complete | MAGI > $299,190 |
| Coordination | Cannot double-up with §23 adoption credit on same expenses |
Note: The §23 adoption credit (max $17,280 for 2025) is partially refundable up to $5,000 starting in 2025 under OBBBA, but the §137 employer-provided adoption exclusion itself was not made refundable.
Group-Term Life Insurance (§79)
| Coverage | Treatment |
|---|---|
| First $50,000 | Tax-free |
| Excess coverage | Taxable using Table I uniform premiums |
| HCE with discriminatory plan | Entire value taxable to HCE |
Table I (IRS Uniform Premiums — unchanged for 2025)
| 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 (2025)
| 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, substantially for employees/family |
| Meals (business convenience) | On-premises, for substantial business reason of employer |
| Moving expenses | Active-duty military only (civilian exclusion suspended through 2025 under TCJA, permanent under OBBBA) |
| Per diem (high-low CONUS, 2025) | $319 high-cost / $225 low-cost |
Real-World Scenario
Scenario: Employee receives a $1,500 watch in 2025 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 2025 adoption assistance exclusion limit?"
The key is to remember: Awards = tangible property only, $400 / $1,600 limits. Life insurance = first $50,000 free. Adoption exclusion = $17,280 (2025). Gift cards = always taxable.
Which achievement award is TAXABLE?
How much group-term life insurance is tax-free?
Tax Year 2025 adoption assistance exclusion maximum?