How the Commuter Benefit
Works
The commuter benefit allows employees to deduct
up to $230 per month from their gross income to pay
for their mass transit commutes. Employees whose monthly
mass transit fees are less than the $230 cap are allowed
to deduct the full amount from their paychecks. The
measure helps employers save money by lowering their
payroll taxes. Additionally, employees are allowed
to deduct up to $230 per month for eligible commuter
parking expenses.
Tax-free commuter benefits can be
structured as an employee-funded tax-free payroll deduction;
as an employer-funded benefit; or the costs can be
shared by the employer and employee. The benefit can
be delivered in the form of transit provided specific
passes (such as monthly passes) or through a reimbursement
model under specific conditions defined by the Internal
Revenue Service.
Commuter tax incentive programs are
making a difference to thousands of employees throughout
the state. In addition to monetary rewards, participants
enjoy a less stressful commute and take satisfaction
in knowing they are helping relieve congestion and
reduce the environmental impact of driving alone to
work.
The program is easy to set up and use and must be
implemented by employers before employees can use it.
The NNTMA is here to assist you in getting your companies
Commuter Tax Benefit program up and running!
The Bicycle Commuter Act
You can now be reimbursed
for riding your bicycle to work. As of January 1, 2009
employers can offer up to $20 per month to employees
who regularly commute to work by bicycle (and who do
not receive any transit or parking benefits) to offset:
- the
cost of buying,
- repairing,
- improving
and/or
- storing their bicycles.
Depending on
what employers want to do and how they are set up,
bicyclists can receive the up to $20 reimbursement
(receipts may be requested by the employer) as:
- cash reimbursements,
- vouchers
redeemable at bicycle shops or parking locations,
- as
a *pre-tax deduction (neither the employee nor the
employer pays payroll taxes on the value of the benefit
and this is "cheaper" than providing an equivalent salary
increase).
Employees and employers both save
- Up
to $20 per month ($240 per year) can be provided
tax-free for bike commuting for the employee.
- Employers
and employees can save on federal, and possibly state
income taxes depending on the option selected.
- For
employers this is an effective way to address their
concerns for the environment and support their employees.
- Employers
that provide "Qualified Tax Fringe Benefits" have
noted reduced stress from not driving, increased job
satisfaction, improved on time arrival and enhanced productivity.
*If an employer wants to report a pre-tax deduction
on W-2s, box 14 can be used. No special IRS reporting,
such as W-2 or 1099 statements are required.
Have
questions about the Bicycle Commuter Act, then visit:
Qualified Transit/Vanpool
Tax Benefit
Thanks to the American Recovery and Reinvestment
Act Americans who commute by transit, which also includes
vanpools can save up to $1,000 or more a year in tax
savings.
This 2009 law raises the amount of pre-tax
income that workers enrolled in employer-sponsored
commuter benefits programs can use to pay for transit
to $230 per month (from $120 per month).
How Will this Affect My
Bottom Line?
This increase will boost savings for both
employees and employers. While employees can save up
to $1,000 per year, organizations that offer the benefit
can save up to an additional $100 per employee, per
year in payroll taxes.
This will be particularly helpful
to commuters looking to offset recent fare hikes and
may in some cases keep the cost of a monthly commuter
pass below what commuters are currently paying. This
incentive will not only benefit commuters economically
but will allow folks to choose an option that is better
for the environment than driving alone.
Environmental Benefits
According to the American Public Transportation Association,
switching from driving to riding mass transit reduces
CO2 emissions by 4,800 pounds per person per year.
Official Language for
Qualified Transportation Fringe Benefits:
IRC 132(f):
Qualified Transportation Fringe Benefits
(1) In general
For purposes of this
section, the term "qualified
transportation fringe" means any of the following
provided by an employer to an employee:
(A) Transportation
in a commuter highway vehicle if such transportation
is in connection with travel between the employee's
residence and place of employment.
(B) Any transit pass.
(C) Qualified parking.
(D) Any qualified bicycle commuting reimbursement.
(2) Limitation
on exclusion
The amount of the fringe benefits
which are provided by an employer to any employee
and which may be excluded from gross income under
subsection (a)(5) shall not exceed-
(A) $100 per month in the case of the aggregate of
the benefits described in subparagraphs (A) and (B)
of paragraph (1),
(B) $175 per month in the case of qualified parking,
and,
(C) the applicable annual limitation in the case
of any qualified bicycle commuting reimbursement.
(3) Cash
reimbursements
For purposes of this subsection,
the term "qualified
transportation fringe" includes a cash reimbursement
by an employer to an employee for a benefit described
in paragraph (1). The preceding sentence shall apply
to a cash reimbursement for any transit pass only
if a voucher or similar item which may be exchanged
only for a transit pass is not readily available
for direct distribution by the employer to the employee.
(4) No
constructive receipt
No amount shall be included
in the gross income of an employee solely because the
employee may choose between any qualified transportation
fringe (other than a qualified bicycle commuting reimbursement)
and compensation which would otherwise be includible
in gross income of such employee.
(5) Definitions
For purposes of this
subsection-
(A) Transit pass
The term "transit pass" means any pass,
token, farecard, voucher, or similar item entitling
a person to transportation (or transportation at
a reduced price) if such transportation is-
(i) on
mass transit facilities (whether or not publicly
owned), or
(ii) provided by any person in the business of transporting
persons for compensation or hire if such transportation
is provided in a vehicle meeting the requirements
of subparagraph (B)(i).
(B) Commuter highway
vehicle
The term "commuter highway vehicle" means
any highway vehicle-
(i) the seating capacity of which
is at least 6 adults (not including the driver),
and
(ii) at least 80 percent of the mileage use of which
can reasonably be expected to be-
(I) for purposes of transporting employees in connection
with travel between their residences and their place
of employment, and
(II) on trips during which the number of employees
transported for such purposes is at least 1/2 of
the adult seating capacity of such vehicle (not including
the driver).
(C) Qualified parking
The term "qualified parking" means parking
provided to an employee on or near the business premises
of the employer or on or near a location from which
the employee commutes to work by transportation described
in subparagraph (A), in a commuter highway vehicle,
or by carpool. Such term shall not include any parking
on or near property used by the employee for residential
purposes.
(D) Transportation provided by employer
Transportation referred to in paragraph (1)(A) shall
be considered to be provided by an employer if such
transportation is furnished in a commuter highway
vehicle operated by or for the employer.
(E) Employee
For purposes of this subsection, the term "employee" does
not include an individual who is an employee within
the meaning of section 401 (c)(1).
(F) Definitions Related to Bicycle Commuting
Reimbursement
(i) QUALIFIED BICYCLE COMMUTING
REIMBURSEMENT - The term "qualified
bicycle commuting reimbursement' means, with respect
to any calendar year, any employer reimbursement
during the 15-month period beginning with the first
day of such calendar year for reasonable expenses
incurred by the employee during such calendar year
for the purchase of a bicycle and bicycle improvements,
repair, and storage, if such bicycle is regularly
used for travel between the employee's residence
and place of employment.
(ii) APPLICABLE ANNUAL LIMITATION - The term ‘applicable
annual limitation' means, with respect to any employee
for any calendar year, the product of $20 multiplied
by the number of qualified bicycle commuting months
during such year.
(iii) QUALIFIED BICYCLE COMMUTING MONTH - The term ‘qualified
bicycle commuting month' means, with respect to
any employee, any month during which such employee-
(I) regularly uses the bicycle for a substantial
portion of the travel between the employee's residence
and place of employment, and
(II) does not receive any benefit described in subparagraph
(A), (B), or (C) of paragraph (1).
The 50 Corridor TMA, in conjunction with SACOG, is sponsoring
a number of educational workshops on the Federal Commuter
Tax Benefit. The 35 minute video below offers an introduction
to the topic.
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