Federal Tax Benefits are available through use of employer-offered IRS Section 132(f) Qualified Transportation Benefits. These benefits provide a tax benefit to employers, and employees save too! Employers can offer them in one of the following ways:
- Employer-Paid
Transportation Benefits. Employers
can pay for their
employees to commute
by transit or vanpool,
up to a limit of
$230/month. With
this arrangement,
employees get up
to $230 in a tax-free
transportation benefit.
Employers get a tax
deduction for the
expense and enjoy
savings on payroll-related
taxes.
- Employee-Paid,
Pre-Tax Transportation
Benefits. Employers
can allow employees
to set aside up
to $230/month of
pre-tax income to
pay for transit
or vanpooling. Employers
save money overall
since the amount
set aside is not
subject to payroll
taxes. Employees
save money, too,
since the amount
of an employee's
salary set aside
for transportation
benefits is not
subject to income
tax, up to the specified
monthly limits.
- Shared-Cost Transportation Benefits. Employers can share the cost of transit or vanpool costs with employees and everyone can receive valuable tax savings. With this approach, employers can provide a portion of the cost of taking transit or vanpooling as a tax-free benefit and allow the employee to set aside pre-tax income to pay for the remaining amount of the benefit (up to the specified limits).
- Parking Cash-Out. Employers can offer their employees the option to "cash out" of their existing parking space. For example, if Company A subsidizes parking for their employees at $60/month, a parking cash-out program would allow employees to choose from the following options: (1) keep the parking space worth $60/month, (2) give up the parking space and receive $60 extra each month in taxable salary, or (3) receive $60/month in tax-free transportation benefits to pay for transit or vanpooling. Cash-out programs often work best for employers that pay separately for parking and for organizations with parking shortages or plans to expand parking facilities.
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