Let Transit Be Your Tax Shelter
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 parking fee from your salary.
What Is the Transit Commuter Benefit?
The program allows employees to purchase transit passes, vanpool and 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 $230.00.
There are Three Ways to Make It Work:
You Pay: Your company allows you to pay for transit passes, vanpool fares or 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 parking commuter benefits except (if any) in excess of $230.00 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 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.
CATS Marketing is available to discuss with your company's benefit department how to get on board with a Transit Commuter Benefit program. Contact us at ETC Interest
or call 704-336-RIDE (7433).