Providing tax benefits to your employees to help cover the cost of their commutes is a great way to show your employees their employer cares about them and cares about how they get to work. In Washington, DC, we suffer from the 2nd worst (longest) commutes in the country. Ease that stress and misery and help your employees find alternatives to sitting alone in traffic by offering a tax-free transit benefit.
Tax-Free Transit Benefit
As of January 1, 2013, the IRS allows employers to provide up to $245* per employee each month ($2,940 per year) towards commuting by public transportation or vanpool. This unique benefit could save your organization thousands of tax dollars each year and provide employees with an incentive to choose more sustainable modes of transportation.
goDCgo consultants will be with you every step of the way to ensure your organization chooses the best program for them. There are typically three ways this benefit can be implemented.
- Direct: Employer subsidizes employees commuting costs.
Tax-free transit benefits provided as an employer contribution allows you to give your employees up to $245 per month, per employee, in benefits to commute to work by transit or vanpool. You pay for the benefit and receive an equivalent deduction from your business income taxes. Employees receive the benefit completely free of all payroll and income taxes, in addition to their current compensation.
- Pre-Tax: Employee pays commuting costs, tax-free, up to allowed amount.
Typically, a set amount is pulled from employee’s paycheck on a monthly or bi-monthly schedule to cover costs of employees commute to and from work.
- Combination: Pre-tax deductions and direct benefits are combined to cover the cost of employee’s commute to and from work.
Bicycle Commuting Reimbursement
As of 2009, biking commuters can receive a reimbursement for biking related commute expenses. For each month a commuter solely uses his bicycle to get to work, the commuter can be reimbursed up to $20 for expenses incurred throughout the year towards biking. The employee cannot receive the biking benefit in combination with the transit benefit and it is only to be reimbursed during the months of the year in which he/she solely bikes to work. As detailed in the IRS tax codes, an expense can include the purchase of a bike, biking equipment or storage facilities.
Once your goDCgo Employer Services consultant has evaluated which type of benefit is best, they will assist you with promoting and marketing this new and exciting benefit to your employees. We can create a customized plan of action to ensure all employees learn about the benefit and are educated about their commuting choices.
*Please note, this amount was previously announced as $240/month and has since been changed.
The IRS announced on January 11, 2013 that "For the tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle [vanpool] is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been put in place). Details on these inflation adjustments and others are contained in Revenue Procedure 2013-15, which will be published in Internal Revenue Bulletin 2013-5 on Jan. 28, 2013."