Tax Benefit Programs*
With a Commuter Tax Benefit Program employers save on payroll taxes while providing their employees with a valued benefit that cuts the cost of their daily commute. Federal tax code allows tax-free transportation fringe benefits of up to $105 per month per employee for transit or vanpool expenses and up to $200 per month for eligible parking. There are a few different ways in which an employer can offer these benefits:
Employer-Paid Transportation Benefits. Employers get a tax deduction for the expense and enjoy savings on payroll-related taxes. The value of the benefit paid to employees is considered a tax-free transportation fringe benefit and not wage or salary compensation, therefore, payroll taxes do not apply. Giving an employee $105 in monthly transit/vanpool benefits is thus less expensive for an employer than raising the employee’s salary by $105 a month. The company-paid benefit, at $1,260 a year, has the same value to employees as a $2,250 raise.
Employee-Paid, Pre-Tax Transportation Benefits. Employees are allowed to set aside up to $105/month of pre-tax income to pay for transit or vanpooling. Employees receive more money from transportation benefits than from a comparable salary increase since they do not pay federal income taxes. Employers save money since the amount set aside is not subject to payroll taxes. As a pre-tax payroll deduction, it provides annual savings up to $500 for employees, and $114 per participant for employers.
Shared-Cost Transportation Benefits. Employers can share the cost of transit or vanpool costs with employees—and everyone can receive valuable tax savings. With this approach, employers can provide a portion of the cost of taking transit or vanpooling as a tax-free benefit and allow the employee to set aside pre-tax income to pay for the remaining amount of the benefit.
Additionally employers in the state of Georgia can receive additional benefits. For more information go to http://www.legis.state.ga.us/cgi-bin/gl_codes_detail.pl?code=48-7-29.3.
The Downtown TMA is happy to come to your worksite to explain each one of these benefits and how they can help boost employee morale while providing a benefit to the employer. For more information, please contact Crystal Clark 404.658.1877 or email cclark@atlantadowntown.com. More questions? Please go to our frequently asked questions page.
*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 employer for residential purposes.
IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits.http://www.irs.gov/pub/irs-pdf/p15b.pdf
Note: The information presented here does not constitute official tax guidance or a ruling by the U.S. Government. Taxpayers are urged to consult with the Internal Revenue Service of the U.S. Department of Treasury or a tax professional for specific guidance related to the Federal tax law.
