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.
  • Commuter benefits can be used for travel by public transportation, commuter shuttle, vanpool, and for qualified parking.
  • Qualified transit expenses up to $260 per month can be excluded from the employee’s gross income.
  • Qualified parking expenses up to $260 per month can be excluded from the employee’s gross income.
  • Transit and parking benefits may be combined for a total pre-tax amount of $520 per month.
  • Employers can no longer deduct the expenses for providing tax-free qualified transportation fringe benefits. However, an employer can report the transportation fringe benefits as taxable W-2 wages to the employee, and the employer can deduct the expenses of providing those benefits. See more on how this works for commuters and employers on Zenefits Help Site.
  • 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. Learn more on the Best Workplaces for Commuters website.

It includes:

  1. Transportation in a commuter highway vehicle between home and work
  2. Any transit pass
  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.

The Bicycle Commuting Benefit, formerly up to $20 per month, is no longer eligible as a tax free benefit, but can be offered still as a taxable benefit to employees.

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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