Employee/Employer Tax Benefits

COMMUTER TAX BENEFITS –  QUALIFIED TRANSPORTATION FRINGE

Fast Facts:
• Allows employees to use tax-free dollars to pay for their qualified commuting costs.
• Commuting costs up to the monthly cap of $130 per month to pay for transit/vanpool or $250 per month for commuter-related parking expenses are excluded from the employee’s gross income.
• The commuter pass and parking benefits may be combined for a total of $380 per month.
• Employers save on payroll-related taxes.
• Commuter benefits can be used for travel by public transportation, commuter shuttle, vanpool, and for qualified parking.
• A commuter benefit may be offered to employees either on a pre-tax basis or it can be provided as a tax-free fringe benefit if an employer chooses to subsidize some or all of the employee’s commuting costs.

Overview:
Internal Revenue Service Section 132(f), the Qualified Transportation Fringe benefit provides that any fringe benefit that is a qualified transportation fringe is excluded from gross income.

It includes: 1. Transportation in a commuter highway vehicle between home and work, 2. any transit pass, or 3. qualified parking.

Amounts that are excluded from gross income are also excluded from Federal Insurance Contributions Act (FICA) taxes (social security and Medicare, including Additional Medicare Tax) and Federal income tax withholding. Check tax code to see if the same deductions are allowed on your state taxes.

Qualified parking is parking provided by the employer to their employees on or near the business premises. It includes parking on or near the location from which employees commute to work using mass transit, commuter highway vehicles, or carpools. It does not include parking at or near an employee’s home.

A bicycle commuting benefit is eligible as well but is only allowed as a monthly reimbursement to employees. Employers can give employees up to $20 per month without including it as part of the employee’s wages. This is to cover the cost of reasonable expenses incurred by the employee in conjunction with their commute to work by bike. This may not be combined with the commuter pass or qualified parking benefit.

Call your Transportation Coordinator at Transaction Associates at 781-895-1100 and we’ll help your company or organization get started.

NOTE: Neither this site nor any eCommuter Commute Options services providers are engaged in rendering legal or financial advice, and provides this information free of charge solely to assist businesses exploring benefits for their respective employees. The information presented here does not constitute official tax guidance or a ruling by the U.S. Government. Taxpayers are encouraged to consult with the Internal Revenue Service or a tax professional for specific guidance related to the Federal tax law. By using these materials, the recipient (1) acknowledges and agrees that eCommuter Commute Options makes no representations regarding the sufficiency (legal or otherwise) of these materials in any particular jurisdiction or for any particular business purpose, and (2) voluntarily and knowingly assumes all risks associated with their use.

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