What qualifies as a "Qualified employee discount"?

A "Qualified employee discount" specifically refers to a benefit provided to employees that does not exceed certain thresholds established by the Internal Revenue Service (IRS). In this context, the correct response indicates that a discount of not more than 20% off the sale price qualifies as a qualified employee discount. Such discounts are generally excluded from an employee's taxable income, thereby making them advantageous both for employees and employers.

The parameters for what constitutes a qualified employee discount are laid out to promote fair compensation structures while minimizing payroll tax implications for both parties. Therefore, the limit of 20% is a regulatory threshold designed to define the boundary between a qualified benefit and a taxable benefit for employees.

The other options do not align with the IRS guidelines that define a qualified employee discount. If the discount is higher than 20%, it could result in taxable income. Small-value services, business expense deductions, or items freely provided do not meet the specific criteria established for qualified employee discounts under IRS regulations.