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National Center for Transit Research » Commuter Tax Benefits

Commuter Tax Benefits

Qualified Transportation Fringe 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.

In 2013, under the fiscal cliff deal, Congress changed the effective date of Qualified Transportation Fringe Benefits (Section 132(f)) and extended its end date through December 31, 2013. The American Taxpayer Relief Act of 2012 provided the option for most employers to provide transit and vanpool tax free benefits to their employees up to $245* per month.

However, in 2013, Congress was unable extend the end date for this tax provision.  As a result, the parity between parking and transit/commuter highway vehicle benefit levels was lost and new limits were based on pre-ARRA levels and cost of living adjustments applied by IRS.

For 2014, 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 $130. The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $250. Commuters can receive both the transit and parking benefits (i.e., up to $380 per month). Employers can allow employees to use pretax dollars to pay for transit passes, vanpool fares and parking but not for bicycle benefits.

Best Workplaces for CommutersEmployers that subsidize at least $30 per month for transit or vanpool fares may meet the National Standard of Excellence and qualify for designation under NCTR’s Best Workplaces for Commuters.

* Recent history:  Under Section 203 of the Administrative Taxpayer Relief Act of 2012, parity between the parking and transit/commuter highway vehicle benefits was reinstated at $240 per month and retroactively increased monthly transit benefit limit for 2012 from $125 per month to $240 per month.  Subsequently, the IRS applied a cost of living adjustment to the $240 per month value.  According to the IRS, “For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

UPDATE:  In late 2013, IRS reported the rates for 2014 after applying cost of living increases: “For taxable years beginning in 2014, the monthly limitation under Section 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $130. The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $250. Source: Internal Revenue Bulletin 2013-47 published on November 18, 2013 

Read over 35 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.

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 adviser to meet your particular circumstances.  For definitions of terms, click on the URLs in the table, including the headers.

2014

Transit Commuter Highway Vehicle (e.g, vanpool) Qualified Parking Qualified bicycle commuting reimbursement
Incentive Levels Up to $130/month*** for transit expenses Up to $130/month*** for vanpool expenses Up to $250/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 $130/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 $130/month*** to commute via vanpool; 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 vanpooling 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 $250/month**** for qualified parking; 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 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 value in gross income According to the IRS, “Generally, you can exclude qualified transportation fringe benefits from an employee’s wages even if you provide them in place of pay. However, qualified bicycle commuting reimbursements do not qualify for this exclusion.”
Employee Tax Benefit Employee receives up to $130/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 $130/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 $250/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 $245 per month in 2013 to $130 per month beginning January 1, 2014

**** tax free parking benefit limit increased from $245 in 2013 to $250 per month beginning January 1, 2014.

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

 

36 Responses to "Commuter Tax Benefits"

  1. 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. Erika Garcia says:

    Hello,
    I work for a large organization, based out of Cleveland, OH. Here in Orange County, we have approx. 1,500 employees. I am interested in learning more about the benefits we can offer our employees. Would you be able to send us some literature so I can have our VP of Finance review the tax benefits. I can then review the details with our HR VP. I hope to bring a benefit to our employees, and help increase our “green” initiatives.

    Regards,
    Erika Garcia
    Human Resources
    Parker Aerospace, CSO Division.

  3. oliver says:

    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.

  4. [...] 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 [...]

  5. Arlene says:

    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?

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

  7. [...] 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 [...]

  8. djs says:

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

  9. [...] 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. [...]

  10. [...] to the new IRS Bike Tax Credit.  Employers don’t have to pay a tax on monies they provide to employees for biking.  And [...]

  11. [...] Beginning on January 1, 2012, PwC can contribute up to $125 per month in tax-free transit and vanpool benefits. Nationally, PwC can allocate pretax dollars to pay for transit passes, vanpool fares and parking (sorry, no federal bicycle benefits yet).  (http://www.nctr.usf.edu/programs/clearinghouse/commutebenefits/) [...]

  12. [...] Beginning on January 1, 2012, PwC employees can contribute up to $125 per month in tax-free transit and vanpool benefits. PwC employees can allocate pretax dollars to pay for transit passes, vanpool fares and parking, but unfortunately there are no federal bicycle benefits yet. Click this link to learn more: http://www.nctr.usf.edu/programs/clearinghouse/commutebenefits/. [...]

  13. James Dykes Williams says:

    Can a van pool use out of pocket expense after thier federal cost issue then commuter checks and they must pay the differnce to the van pool company.

  14. winters says:

    With the cavaet below … Yes. If you are receiving transportation fringe benefits (commuter benefits) for a qualified commuter highway vehicle (e.g., 7+ passenger vanpool that carries at least 5 people including the driver and about >80% use of the vehicle is for commuting), most commuters can combine employer subsidies with out-of-pocket expenses to pay for a seat in the vehicle. If the cost per seat is $230 per month and your employer provides $125 per month as a voucher (e.g., commuter check) then you would need to also contribute $105 per month. Your employer can allow you to use pre-tax income to pay your share ($105) which reduces the impact to you. For example, you might need $120 in income to yield $105 in spendable income (after payroll and withholding taxes subtracted). Pre-tax payment means you only need $105 in income to yield the $105 increment. There is no requirement that the employer provide a pre-tax option.

    The information presented here does not constitute official tax guidance or a ruling by the U.S. Government. Taxpayers are urged to consult with the Internal Revenue Service of the U.S. Department of Treasury or a tax professional for specific guidance related to the Federal tax law.

    Phil Winters
    Best Workplaces for Commuters

  15. Jef says:

    Does anyone know if the expense for implementing a corporate carpool program would be applicable for this tax break?

  16. [...] and check out this article and you will see you are reward for using automobiles. Read more at the National Center for Transit Research. Beginning on January 1, 2012, employers may provide workers with up to $125 per month in tax-free [...]

  17. Ralph Kapust says:

    What Government office, Department and/or Government Representative can I contact to ask why a daily driving commuter to work does not get any pretax benefits.
    I took public transportation for many years and was able to use the pretax benefit for my commuter parking costs and train ticket costs, but my company transferred me to a remote office that can only be driven to because there is no public transportatiom and there is no car pooling van available. Now I have a huge weekly gasoline bill and I have to pay 2 tolls a day too, all with no pretax benefit.
    If your employer is able to determine your daily commuting mileage, with tolls, then the government should provide a pretax benefit based on the governments allowed cost per mile, and include tolls, and allow a pretax benefit equal to those costs. If the government does not want to be responsible for verifying the drivers mileage, etc., make the employer be responsible for the mileage and toll cost determination, in order to provide this benefit to their employees.

  18. [...] adjustment. If your employer doesn't talk to them. It easily covers the $50 per month. Source: http://www.nctr.usf.edu/programs/cle…mmutebenefits/ [...]

  19. [...] Uncle Sam will pay you to bike. Since January 2012, cyclist commuters have been entitled to a $20 per month tax-free reimbursement for bike-related expenses. –       Women could use the extra bone support. –       You [...]

  20. Joe says:

    Unbelievable that I can’t get 100% of my transit costs covered but you can get parking subsidized up to twice as much! this simply motivates people to move further into the suburbs, increasing our national oil consumption. Also, why can’t I get the bike benefit, too, when I ride to the train station. I can get the parking benefit at the train station, but not a biking benefit? Inane.

  21. [...] the savings don’t necessarily stop there. According to the Commuter Tax Benefits, employers can give their employees up to $125 per month to cover transit or vanpool costs, or they [...]

  22. [...] pegged to inflation. It also doesn’t allow as much as other commuter benefits (for instance, $245/month for a T pass), but to be fair, riding a bike is much [...]

  23. [...] Employees may be able to pay for public transportation with pretax payroll deductions, thanks to the American Taxpayer Relief Act of 2012. In 2013, companies can offer $245 per employee per month for vanpool, bus, ferry, rail or qualified parking, according to the National Center for Transit Research. [...]

  24. [...] employee can be “reimbursed up to $20/month for reasonable expenses related to commuting by bicycle.” Employers of bicycling employees can [...]

  25. […] 2012, if you commute to work 3x’s a week on your bicycle, you are entitled to a $20 per month tax-free reimbursement for bike-related expenses. Qualifying expenses include bike repairs and storage expenses. How cool […]

  26. […] January 2012, cyclist commuters have been entitled to a $ 20 per month tax-free reimbursement for bike-related […]

  27. […] January 2012, cyclist commuters have been entitled to a $20 per month tax-free reimbursement for bike-related […]

  28. […] January 2012, cyclist commuters have been entitled to a $20 per month tax-free reimbursement for bike-related […]

  29. […] The federal commuter tax benefit is an obscure subsidy most Americans have likely never even heard of. But it’s a simple […]

  30. […] federal commuter tax benefit is an obscure subsidy most Americans have likely never even heard of. But it’s a simple […]

  31. […] 12. Lipton, Richard. “Reviewing 2014 Tax Changes” […]

  32. […] to the National Center for Transit Research, since January of 2012 you can now earn a $20 per month tax-free reimbursement for bike related […]

  33. […] Tax benefits of up to $20 per month. […]

  34. […] You will get a tax break if you commute by bike. Read more about it here. […]

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