If you are interested in saving money, you’ll find it worth the time to take a closer look at Commuter Benefits.
Commuter Benefits make commute alternatives more economical for you, often without any additional cost to your employer. If you ride transit or join a vanpool, you may be able to take advantage of the tax-free benefit associated with Commuter Benefits. Not only will you take home more of your paycheck, but you’ll save money on your vehicle’s operating costs. It’ll feel like you’re getting a raise.
To find out if your company offers pre-tax dollars for Commuter Benefits programs, contact your Employee Transportation Coordinator or your Human Resources Manager. For more information on Commuter Benefits, have your employer contact Metro.
Federal IRS tax code 132 (f), has tax breaks available for subsidizing transit and vanpooling for your employees. In addition, your employees may benefit when they set aside pre-tax dollars for certain transit or vanpool expenses.
Commuter Benefits to Employers:
- Enhance your benefits package at little or no cost
- Minimal paperwork required
- Reduces payroll and business income taxes
Commuter Benefits to Employees:
- Provides commute cost savings
- Allows flexibility transit and vanpool riders
- Reduces personal income taxes
- Benefits in addition to salary are treated as a regular business expense similar to medical insurance premiums.
- Transportation benefits are excluded from cafeteria plans. IRC Section 125 covers cafeteria plans and flexible spending accounts. Section 132(f) covers transportation benefits.
- Section 132(f) benefits are exempt from anti-discriminatory requirements. The employer decides who receives the benefits.
- There is no “use it or lose it” rule. Any amount not used by the employee at the end of the year is returned to the employee the following year as taxable income.
There are five ways an employer can choose to participate:
- Tax Breaks When You Subsidize Vanpools/Transit
You may provide up to $230 per month tax free to employees who commute to work by transit or vanpools. As the employer, you pay for the benefit and receive the equivalent deduction from business income taxes. Employees receive the benefit completely free of all payroll and income taxes in addition to their current salary. You may pay directly for vanpool expenses or purchase transit passes for employees.
- Employees May Set Aside Pre-Tax Dollars, and Employers Save on Payroll Costs
You may permit employees to set aside up to $230 per month of their pretax income to pay for transit or vanpools. Employees save on payroll and income taxes since that amount is no longer reported as taxable salary. Since the amount set aside is treated as a benefit, you’ll be able to reduce payroll costs.
- A Flexible Plan for Employers Who Partially Subsidize Costs
You may subsidize a portion of vanpool and transit costs in addition to salary and allow your employees to set aside part of their pre-tax income to pay the remaining amount. You can subsidize any amount or allow the employee to set aside any amount, but only $230 per month is tax deductible.
- Parking Cash-Out
You may offer employees the option of cashing out the dollar value of parking you provide. Employees forego the parking and either receives a taxable cash value of the parking space or a tax-free transit or vanpool benefit of up to $230 per month.
- Bicycle Benefit
You may also offer your employees $20 per month for reasonable expenses associated with bicycling to work. Unlike other qualified transportation benefits, bicycle commuting reimbursements cannot be funded through employee pretax income.
Monday March 01, 2010
Monday March 01, 2010