Pre-tax commuter benefits: What you need to know

Pre-tax commuter benefits allow employees to deduct their monthly commuting expenses from their paycheck. The result is more take-home pay for the employee and fewer payroll taxes paid by the employer.

In today’s competitive job market, offering pre-tax benefits such as commuter benefits can help attract and retain top talent.

Here’s what you need to know about pre-tax commuter benefits: 

Employee contribution

Employees can set aside up to $300 per month on transit expenses andup to $300 per month on parking expenses.

The IRS reviews this amount yearly, setting higher limits with an average of a $5 increase annually.

How much employees save

Employees can save $700 or more annually by setting aside $300/month.

Commuter benefits can add up to some serious tax savings. Commuter benefits can be applied to mass transit, rideshares, and qualified paid parking. Check out our calculator to see how much your employees could save.

Use it or lose it?

Commuter benefits are not true “use it or lose it” benefits. When an employee leaves, unused commuter benefits funds will be returned to their employer.

However, per IRS regulations, employers cannot refund unused commuter benefits funds back to employees.

What is covered?

Pre-tax commuter benefits can be used for the following transportation:

• Train
• Bus
• Ferry
• Rideshare (Uber Pool, Lyft Shared)
• Parking
• Biking
• And more

How it works

Commuter benefits can be dispersed in several different ways:

Transit

• Prepaid cards – Reloadable commuter benefit cards are accepted at transit agencies or designated transit retail centers.
• Commuter Check vouchers – Vouchers are redeemable for passes, tickets, or cards anywhere transit, parking, or vanpool vouchers are accepted.
• Transit passes – Transit passes can be secured online and sent to the employee by mail each month.
• Agency-specific smart cards – Companies can request smart cards for their employees to use at specific transit agencies.

Parking

• Prepaid cards – A true “swipe and go” solution, these prepaid cards are accepted by vendors nationwide.
• Monthly direct pay – Direct monthly payment to parking and vanpool providers.
• Commuter Check for parking vouchers – Vouchers are made payable to the parking provider.
• Parking cash reimbursement – Reimbursement for one-off parking needs.
• SpotHero – Easily book affordable parking at more than 5,000 garages, lots, and valets, and pay with a prepaid card.

Biking

• Commuter Check for biking vouchers – Commuter Check for biking vouchers can be ordered in any denomination between $10 and $20 and are accepted at participating bicycle shops and bicycle storage facilities nationwide.

How these benefits benefit you

Pre-tax commuter benefits are a great way to attract, retain, and reward employees. With easy, hassle-free sign-up and many other employee advantages, adding commuter benefits helps create a happier and more productive work environment.

Let us know if you’re ready to explore how pre-tax commuter benefits can help your employees and your bottom line. Schedule a meeting with us today, so we can help you find the programs you need.