What Are Commuter Benefits?

If you ride Tri Delta Transit (or BART, ferry, or vanpool) to work, you could be saving 40% on your commuting expenses. The federal government allows employees to deduct up to $130 per month from their paychecks, pre-tax, to pay for transit and vanpool expenses.

Win-Win for employees and employers

Employees save by using pre-tax dollars for their commute expenses. Employers get the advantage of reduced payroll taxes and a popular benefit program that is easy and inexpensive to administer.

Thousands of employers in the Bay Area and across the country are offering commuter benefits to their employees. You could be taking advantage of this savings, too!

We ALL Benefit

By providing significant cost savings, commuter benefits encourage the use of public transit and vanpools to get to work. This relieves traffic congestion and reduces air pollution, making East Contra Costa County a better place to live.

How Commuter Tax Benefits Work

The Federal tax code allows the use of tax-free dollars to pay for transit commuting and parking costs through employer-sponsored programs. Commuter benefits are regulated by the Internal Revenue Code, Section 132(f)—Qualified Transportation Fringe. As of January 2014, the tax code allows tax-free transportation fringe benefits of up to $130 per month per employee for transit expenses.

Companies can offer:

  • a tax-free employer-paid subsidy
  • a pre-tax employee-paid payroll deduction
  • a combination of both of the above

Employee Savings

Employees who set aside income on a pre-tax basis for a qualified transportation fringe benefit do not pay federal income or payroll taxes on the income set aside. For example, if you have a combined (local, state, federal) tax rate of 40% and spend $130 per month on public transit, you will save $52 each month or $624 a year.

If an employer chooses instead to subsidize the benefit it is actually more valuable than an equivalent raise because of the tax advantages.

Employer Savings

Providing pre-tax commuter benefits to employees can save payroll taxes for employers. The value of the benefit paid to employees is considered a tax-free transportation fringe benefit and not wage or salary compensation so payroll taxes do not apply. Employers can save roughly 9% in payroll taxes (including FICA, SUI, SDI and city taxes) on the amount employees set aside. If the employer chooses to offer the benefit in addition to salary, giving an employee $130 in transit benefits is thus less expensive for an employer than raising the employee’s salary by $130.

How to Get Started

Commuter Benefit programs are easy for your employer to implement. The following links will take you to some of the providers who can work with employers to make the appropriate arrangements. In addition, benefit management companies such as ADP, Ceridian, SHPS, Fringe Benefits Management, etc. can assist many employers with the implementation of a Commuter Tax Benefits program.

CommuterCheck

(800) 727-9436

Wage Works

http://www.gowithcx.com
(866) 602-3887

TransitCenter

www.transitcenter.com
(866) 204-5808

Tranben, Ltd.

tranben.com
1-877-TRANSBEN

eTRAC®

www.benefitresource.com/etrac-commute/etrac-basics
(866) 996-5200

CBS Administrators, LLC

www.cbsadmin.com
(866) 770-0404