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National Center for Transit Research » Commuter Tax Benefits

Commuter Tax Benefits

April 22nd, 2011 | 8 Comments

Commuter Tax Benefits Summary Table

Qualified transportation fringe benefits (Section 132(f) of the Internal Revenue Code) or “Commuter Tax Benefits” are like money in the bank. Employers save on payroll related taxes. Employees save on federal income taxes.

Read over 30 Frequently Asked Questions, including questions about the bicycle commute option, in our National TDM and Telework Clearinghouse/Best Workplaces for Commuters‘ Support Center for more details about Commuter Tax Benefits.

Beginning on January 1, 2012, employers may provide workers with up to $125 per month in tax-free transit and vanpool benefits (this is a decline from $230 per month in 2011). The monthly limitation under Section 132(f)(2)(A) Qualified Transportation Fringe Benefits regarding the aggregate fringe benefit exclusion amount for vanpools (commuter highway vehicles) and transit passes is $125. The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $240 – up from $230 per month in 2011. Commuters can receive both the transit and parking benefits (i.e., up to $365 per month). Employers can allow employees to use pretax dollars to pay for transit passes, vanpool fares and parking but not for bicycle benefits.

The following summary was prepared to concisely but generally explain qualified transportation fringe benefits.  However, there are exceptions (e.g., partners, 2% owners in S-corps) so you should check with your tax advisor to meet your particular circumstances.

2012

  Transit Vanpool Qualified Parking Qualified bicycle commuting reimbursement
Incentive Levels Up to $125/month* for transit expenses Up to $125/month* for vanpool expenses Up to $240/month** for parking at or near an employer’s worksite, or at a facility from which employee commutes via transit, vanpool, or carpool Up to $20 per qualified bicycle commuting month. This exclusion for qualified bicycle commuting reimbursement includes any employer reimbursement during the 15-month period beginning with the first day of the calendar year for reasonable expenses incurred by the employee during the calendar year.
Employer Tax Benefit Employers give their employees up to $125/month* to commute via transit; gets a tax deduction and saves over providing same value in gross income or Employers allow employees to use pre-tax income to pay for transit and employers save on payroll tax (at least 7.65% savings) or A combination of both up to statutory limits Employers give their employees up to $125/month* to commute via vanpool; gets a tax deduction and saves over providing same valuein gross incomeor Employers allow employees to use pre-tax income to pay for vanpooling and employers save on payroll tax (at least 7.65% savings)orA combination of both up to statutory limits Employers give their employees up to $240/month** for qualified parking; gets a tax deduction and saves over providing same valuein gross income orEmployers allow employees to use pre-tax income to pay for qualified parking and employers save on payroll tax (at least 7.65% savings) or a combination of both up to statutory limits Employers reimburse their employees up to $20/month for qualified bicycle commuting; gets a tax deduction and saves over providing same valuein gross income According to the IRS, “Generally, you can exclude qualified transportation fringe benefits from an employee’s wages even if youprovide them in place of pay. However, qualified bicycle commuting reimbursements do not qualify for this exclusion.”
Employee Tax Benefit Employee receives up to $125/month* tax free for transit or vanpool (this value will not appear on their W-2 form) or Employee pays for commute benefit with the pre-tax income and saves on income tax or A combination of both Employee receives up to $125/month* tax free (not on their W-2 form) or Employee pays for commute benefit with the pre-tax income and saves on income tax or A combination of both Employee receives up to $240/month** tax free (not on their W-2 form) for qualified parking or Employee pays for commute benefit with the pre-tax income and saves on income tax or A combination of both Employee reimbursed up to $20/month for reasonable expenses related to commuting by bicycle

* tax free transit and vanpool benefit limit decreased from $230 to $125 per month beginning January 1, 2012
** tax free parking benefit limit increased from $230 to $240 per month beginning January 1, 2012

Qualified bicycle commuting month.
For any employee, a qualified bicycle commuting month is any month the employee: Regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment and does not receive: Transportation in a commuter highway vehicle, Any transit pass, or Qualified parking benefits

.Reasonable expenses include: The purchase of a bicycle and Bicycle improvements,repair, and storage. These are considered reasonable expenses as long as the bicycle is regularly used for travel between the employee’s residence and place of employment.

Additional Resources

 

8 Responses to "Commuter Tax Benefits"

  1. William Hamilton says:
    June 3, 2011 at 7:11 am

    We’re seeking some literature we can pass on to businesses we’re contacting as part of our transit outreach efforts.

    William Hamilton
    PO Box 549
    Charleston, SC 29402

  2. oliver says:
    November 8, 2011 at 11:19 am

    Simply astounding that in this day and age we’re still subsidizing people $230 a month to encourage them to drive their cars to work.

  3. Tell Your Members of Congress to Protect the Commuter Transit Tax Benefit | Citizens Planning and Housing Association, Inc. says:
    November 17, 2011 at 10:23 am

    [...] The government is perilously close to disincentivizing the use of public transit by commuters. The commuter transit tax benefit, which allows individuals to count up to $230 per month in transit costs as pre-tax, is set to [...]

  4. Arlene says:
    December 4, 2011 at 9:24 am

    In response to Oliver:
    Try to think outside the box, some people do not live near train or bus stations and some people work off shifts or night shifts like nurses. Why shouldn’t they be given a break in these tough economic times?

  5. Transit Commuter Tax Benefit Will Be Slashed Almost In Half January 1 | Hop Stop says:
    December 28, 2011 at 8:47 pm

    [...] was only in March 2009, after a long legislative struggle, that transit commuters saw their benefits equalized with [...]

  6. Subway Blues: Car Commuters Are Getting Bigger Tax Breaks Than Transit Riders | The New York Town Centre Site says:
    January 10, 2012 at 7:36 pm

    [...] at the beginning of this year, cars regained their lofty perch. To pay for parking, car commuters can set aside $240 (pre-taxes) each month, while public transit users can only use $125 pre-tax dollars. Over a [...]

  7. djs says:
    January 12, 2012 at 4:50 pm

    Monthly commuter rail pass currently $265, commuter rail wants 43% rate increase to $375, yet tax free benefit drops ($105), c,mon man.

  8. Congress Will PAY YOU to Avoid Public Transit in 201 | InvestorPlace says:
    January 18, 2012 at 10:29 am

    [...] That’s right. You get twice as much of a write-off to drive to work instead of taking the bus. Read the details at the University of South Florida’s National Center for Transit Research. [...]

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