(Download
Document In Adobe PDF Format)
What Is the Transit Commuter Benefit?
The Transit Commuter Benefit was passed into law and revised in June 1998. Now you can ride transit, vanpool or carpool (the carpool parking cost can reduce your tax burden) and deduct the cost of the pass, monthly vanpool fare or monthly carpool parking fee from your salary.
The program allows employees to purchase transit passes, vanpool and carpool parking vouchers with pre-tax dollars. It was designed to improve air quality, reduce traffic congestion, and conserve energy by encouraging employees to commute by means other than single occupancy motor vehicles. The amount available to be deducted each month is $110.
Am I Eligible for Transit Benefits?
Private employers, non-profit organizations, and public agencies can provide transit commuter benefits to employees, tax free. Federal government employees and members of the military services are also eligible to receive transit commuter benefits. Federal government employees in the National Capital Region receive the transit benefits under SAFETEA-LU. Under an Executive Order signed in April 2000, federal employees in other areas of the U.S. are allowed to spend up to $110 per month of their pre-tax income for transit benefits. Self-employed individuals, partners, 2-percent share holders of corporations, sole proprietors, and other independent contractors are not eligible under IRS rules.
How Does it Work?
You Pay: Your company allows you to pay for transit passes, vanpool fares or carpool parking fees through payroll deduction, all with Pre-Tax dollars. You get the benefit of transit without paying taxes on the expense.
You & Your Company Share: You and your company share the cost of transit, vanpool or carpool parking. Your company commits to paying a portion of the expense and the remainder is covered through your payroll deduction, of course with pre-tax dollars.
Your Company Pays: Your company pays the entire amount and provides you with a transit pass, vanpool voucher or carpool parking voucher.
What Taxes Are Eliminated?
Employees who choose to use pre-tax dollars for transit commuting services DO NOT pay federal income or payroll taxes on transit, vanpool or carpool parking commuter benefits except (if any) in excess of $110 per month. Generally, state taxes do not apply either.
How To Start a Transit Commuter Benefit Program
The Transit Commuter Benefit program is easy to start, easy to administer, and does not require extensive record keeping. When employees pay all of the cost, employers only need to keep a record of the purchase of transit passes, vanpool vouchers or carpool parking vouchers. In situations where the employer pays for part or all of the cost, records need to demonstrate that cash paid to employees is being used for transit, vanpool commuting costs or carpool parking costs.
For employers: Although the Transit Commuter Benefit cannot be part of a cafeteria plan, employers may use the same forms and administrative procedures for a transit commuter benefit program that they use for their cafeteria plan. Employers may also rely upon other parties to administer the program.
For More Information:
Contact the American Public Transportation Association at rgandee@apta.com for price information on the "It Pays to Ride Public Transportation" brochure. You can also visit the Best Workplaces for Commuters' Web page at www.bwc.gov.
Some of these pages may include links to documents in the Adobe PDF format. Please download the Adobe PDF reader if you have not already done so.
