Commuter Tax Benefits
Commuter tax benefits are an easy way for employers and employees to save money! The IRS allows employers to withhold a set amount of an employee's pre-tax income for vanpool, transit, parking and bike commuting costs.
Employers may also provide a monthly fare subsidy as a part of the qualified IRS Transportation Fringe Benefit, under section 132(F) of the IRS tax code. This lowers an employee's taxable income, putting more money in their pocket. It also lowers the employers' FICA burden. It's a win-win-win. For the employee, the employer, and traffic congestion!
Here's How It Works For Commuters:
- Your employer takes your commuting costs (up to $245 per month) out of your paycheck before figuring taxes. This lowers your taxable income, which puts more money back into your paycheck.
- You pay your approved commute expenses and submit a receipt to your employer for a tax-free reimbursement. It's that simple!
- Unlike a typical pre-tax "FLEX Plan", a qualified transportation benefit program is not a use-it-or-lose-it program. Monies that go unused in your account are automatically rolled over for future use.
- Your employer has to be the one to establish and administer the program. It's a great way for them to save money and offer a new employee benefit at no cost.
Here's How It Works For Employers:
- Your employer lets employees know the program is available and signs them up. If they already have pre-tax programs in place, they can set this employee benefit up the same way.
- When processing payroll, the employer proportionately reduces their FICA tax for each participating employee.
- When the employee submits their vanpool expenses to the employer for reimbursement, the employers processes the check according to the rules they have established for this benefit.
For detailed information regarding Commuter Tax Benefits, please review this summary table:
Commuter Tax Benefit