What Are Commuter Benefits?
If you ride Tri Delta Transit (or BART, ferry, or vanpool) to work, you could be saving money on your commuting expenses. The federal government allows employees to deduct up to $260 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. On October 19, 2017, the IRS issued Revenue Procedure 2017-58. For tax year 2018, the monthly limitation for the qualified transportation fringe benefit is $260.
Companies can offer:
- a tax-free employer-paid subsidy
- a pre-tax employee-paid payroll deduction
- a combination of both of the above
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 $260 per month on public transit, you will save $104 each month or $1248 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.
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.
CBS Administrators, LLC