Today's Date: May 22, 2017
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Federal Tax Benefits for Transit Passes

Commuter Tax Benefit

What is the Commuter Tax Benefit?

Transit users can set aside a certain amount of pretax income for commuting. In January 2013, the Internal Revenue Service announced that the monthly limit for transit would increase to $245 in 2013.   The IRS also reported that a $240 limit will be retroactively applied to 2012, replacing the $125 ceiling that was in place last year (before the bill was approved).

How the Commuter Tax Benefit Works

Tax-free commuter benefits can be structured as an employee-funded tax-free payroll deduction; as an employer-funded benefit; or the costs can be shared by employer and employee. The benefit can be delivered in the form of transit provider-specific passes (GATRA passes would work in this case), universally accepted vouchers and terminal-restricted debit cards, or through a reimbursement model under specific conditions defined by the IRS.

Employers Save on Payroll Related Taxes.

Providing pre-tax commuter benefits to employees can save payroll taxes for employers.  The value of the benefit paid to employees is considered a tax-free transportation fringe benefit and not wage or salary compensation, therefore, payroll taxes do not apply.  As a result, employers can save up to 10% in payroll taxes (including FICA, SUI, SDI and city taxes) on the amount employees set aside.

How to Get Started

Companies that are interested in implementing a Commuter Tax Benefit program for their employees can get started by contacting the Transit Center at 866-204-5808 or by visiting the website at: www.transitcenter.com/. This helpful site helps companies enhance their employee benefit package and save big on payroll taxes.  Also, employees can use the TransitChek tool to calculate their individual commuter and environmental savings.