Commuter Tax Benefits

The tax benefits of helping your employees utilize an alternative form of transportation are many. Here are three ways to take advantage of the tax-savings:

• The employee pays for a transit pass or vanpool seat with pre-tax money. The IRS Tax Code 26 CFR Section 132 (f)(3), the Qualified Transportation Fringe Benefits law, allows employees to set aside up to $115 per month pre-tax for transit or vanpool expenses, much like a medical expenses flexible spending plan. The employee pays no income tax on the benefit and the employer saves on reduced payroll taxes.
  
  
• The employer pays the full cost of a transit pass or vanpool seat. And, like most business expenses, the cost can be deducted.
  
  
• The employee and the employer share the cost of the transit pass or vanpool seat and both share in the savings.

As evidenced by the graphs below, when you offer your employees a
$115 commute benefit versus a $115 salary increase, both you and your
employees come out ahead.