Tax Incentives

Tax Incentives

Tax Incentives

Did you know the IRS allows for Transportation Fringe Benefits up to $255/mo for transit costs, $255/mo for parking costs, and $20/mo for bike commuting expenses? Employees can save up to 40% by paying for their transit passes or vanpool fees pre-tax! And employers can save up to 7.65% on their payroll taxes!

Transportation Fringe Benefits

Transportation fringe benefits, (IRS Code section 1.132-9), can come in a few forms.

  • Cash contribution/reimbursement from employers (the money you give your employees will be free of payroll taxes).
  • Pre-tax payroll deduction from an employee’s salary (employees spend up to 40% less and employers save on payroll taxes).
  • A combination of a cash contribution from the employer and a pre-tax payroll deduction.
  • Reimbursement from employer for employee costs incurred by bicycle commuting No longer available in the 2018 tax reform.

Read more at IRS Publication 15-B (go to page 19).

Pre-Tax Benefits Administration Providers

Commuter Benefits Solutions by Edenred

“What is the second highest monthly expense, right behind the cost of mortgage or rent? It’s transportation.So, how can you help your employees get the most out of their paychecks? Consider adding one of our Commuter Benefit programs as a low-cost perk for your valued employees.” “By using pre-tax Commuter Benefits, commuters can save up to 40% on eligible transit and parking costs. For those that bike to work, they can earn up to $20 a month for bicycle maintenance, repairs and accessories. And the best part of all? Companies can save up to 7.65% on their payroll taxes. Commuter Benefits are a win-win!” Read more from Edenred.

HR Simplified

“A commuter account allows employees to set aside pre-tax funds for qualified mass transit and parking expenses associated with the employees commute to work. The funds are deducted from the employee’s paycheck on a pre-tax basis, reducing the employee’s taxable income. The employee can elect up to $255 per month for parking expenses and up to $255 per month for transit expenses.” Read more from HR Simplified.

Bike Benefit

Employers may provide a reimbursement of up to $20 per month tax-free to employees. Read about it from the League of American Bicyclists. UPDATE 1/3/2018: The “Tax Cut and Jobs Act” passed in late 2017 suspends the Bicycle Commuter Benefit until 2026.

The Bicycle Commuter Act provides a tax-benefited reimbursement for the expenses of bicycle commuting.

Any employer, if they chose to do so, may provide a reimbursement of up to $20 per month for reasonable expenses incurred by the employee in conjunction with their commute to work by bike. The reimbursement is a fringe benefit paid by the employer the employee does not get taxed on the amount of the reimbursement.

Be aware, though, that the bicycle commuter benefit is more restrictive than other qualified transportation fringe benefits in several ways:

  • An employee cannot choose to reimburse themselves with pre-tax income, the reimbursement must be paid by the employer; and
  • An employee cannot receive both the transit and bicycle fringe benefits in the same month.