Tax Incentives
The federal tax code allows employers to offer tax free benefits for the purposes of taking transit, vanpooling and paying for parking - Section 132 (f) of the Internal Revenue Code. These “Qualified Transportation Fringe Benefits” are deducted from corporate gross income for taxes paid by the employer. Both employers and employees save on taxes because neither pays federal income or payroll taxes on these benefits.
There are limits on the value that are regarded as pre-tax or tax free
- As of January 1, 2010 up to $230 is excludable from gross income per month for vanpooling, transit and parking.
- The employer can provide parking benefit with transportation benefits. As long as total does not exceed $460
- Up to $20 is allowed for bicycling expenditures
- Any amount exceeding ceiling is income
Employee Benefit and Tax Reporting
- Qualified transportation fringe benefits that do not exceed statutory limit are not wages for Federal Insurance Contributions ACT (FICA), Federal Unemployment Tax ACT (FUTA) and federal income tax withholding
- The total amount is not reported on the employees’ W-2 form
Resources
Implementation and General Information
