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Transit Benefits

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.

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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.

2017

Transit Vanpool Qualified Parking Qualified bicycle commuting reimbursement
Incentive Levels Up to $255/month*** for transit expenses Up to $255/month*** for vanpool expenses Up to $255/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 $255/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 $255/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) or A combination of both up to statutory limits Employers give their employees up to $255/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 $255/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 $255/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 $255/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 increased from $130 per month in 2014 to $250 per month beginning January 1, 2015. It was raised to $255 per month for 2016.

**** tax free parking benefit limit increases from $250 per month in 2015 to $255 per month beginning January 1, 2016.

+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.

Table provided courtesy of the Best Workplaces for Commuters  (www.bestworkplaces.org) – a program of the National Center for Transit Research at the University of South Florida.