A pre-tax commuter benefit is when employees can have the monthly cost of their commute deducted from pay before taxes, which means more take-home pay and for employers, saving on reduced payroll taxes.
When an employee enrolls in a pre-tax commuter benefits program, they will provide the amount of their monthly commuting cost for transit and/or commuter related parking up to the monthly limits. By using pre-tax dollars, employees are saving 40% on their commuting costs.
The tax-free commuting dollars are provided on a product, like vouchers, smart cards, debit cards, or paid directly to transit and parking operators, to cover all commuting options and to ensure compliance with the IRS rules for commuter benefits. Right now, employees can use up to $270 a month for transit, and the same amount for commuter related parking.
By offering employees a pre-tax commuter benefit program, the cost of commuting deducted for employees reduces the amount of payroll being taxed. This means a savings of up to 7.65% on average, on payroll taxes. The more employees that enroll, the greater the savings.
Ready to start saving? We can help! Edenred Benefits offers programs designed for large, national organizations, medium-sized companies and small business. Each offers a full range of products for employees and specialized commuter benefits support and service for employees and employers.
If you want to learn more about commuter benefits to save money, download our 101 Guide now.