When you help your employees with their transportation needs, you may also be able to take advantage of tax benefits.
The federal government offers tax benefits for certain transportation expenses. These “Commuter Choice” benefits make it less expensive for commuters to choose transit, vanpooling, and even bicycling as a commute option.
- Under the federal Commuter Choice program, the employer may cover up to the full cost of the tax-free benefit – up to $255 per month for transit and vanpool expenses and up to $255 per month for qualified parking. Bicycle commuters can be reimbursed to $20 per month. The benefit is offered tax-free to employees and does not require payroll taxes for the employer or employee.
- The company allows the employee a “pre-tax” benefit in which employees may have up to $255 per month taken out of their current monthly pay toward the cost of commuting on transit or in vanpools and up to $255 per month for parking. Employees save federal income and payroll taxes. Many employers prefer this option because the employee pays the cost and the employer saves money because payroll taxes do not apply.
- The employer and employee each pay a share. The employer, for example, might offer $55 per month in transit/vanpool benefits and allow the employee to reserve up to $200 per month as a pre-tax benefit. The total tax-free benefit remains $255 per month for transit and vanpool.
- On October 19, 2017, the IRS issued Revenue Procedure 2017-58: “For tax year 2018, the monthly limitation for the qualified transportation fringe benefit is $260, as is the monthly limitation for qualified parking.” The 2017 limit is $255 per month. The bicycle benefit remains unchanged at $20 per month (reimbursable). Bike share was not added as a qualified transportation fringe benefit.
Talk to a Commuter Services representative for more information. Call us at 1.866.585.RIDE.