IRS commuter benefits
Years ago, a simple yet ingenious idea took root: By allowing workers to defray public transportation costs through their employers' benefits packages, we could reduce traffic congestion and improve air quality. In 1998, Congress amended the tax code to allow employees to take advantage of commuter benefit using their own pre-tax dollars.
Today, commuter benefits have joined health, retirement and disability at the top of the list of voluntary benefits offered to employees by their employers. In the new 2018 tax bill, transportation benefits are, in some cases, changed.
- Does Not touch section 132(f) – which is the section that deals with transportation fringe benefits – so
there is no change on the individual side of commuter benefits
- The House bill does eliminate deductibility of subsidy programs. Said a different way, employers who
subsidize transit (or parking) can no longer write off those subsidizes for corporate tax purposes.
- However, the amount subsidized is still exempt for payroll tax purposes.
- For employers who provide a pre-tax program (a majority) there is no change. This represents a majority
of transit benefit programs.
An employee may pay part of all of the cost of public transportation with pre-tax income via a payroll deduction; the employee can set aside up to $255 per month of pretax income during 2016 tax year. The employee saves federal withholding and FICA payroll taxes on the amount of deducted. The employer saves paying FICA on the amount deducted. Pre-tax payroll deductions are referenced in the Internal Revenue Code, Section 132(f) as amended by TEA-21, Title IX, Section 910.
Bicycle Benefits No Longer Allowed .
Review the IRS’ Employer Tax Guide to Fringe Benefits for more information.