Qualified transportation fringe benefits (Section 132(f) of the Internal Revenue Code), or “Commuter Choice Tax Benefits,” allow employers to save on payroll-related taxes and employees to save on their federal income taxes.
The Tax Cuts and Jobs Act signed into law on December 22, 2017 made changes to Qualified Transportation Fringe Benefits. Employers may still provide tax-free qualified transportation fringe benefits to employees for parking, transit, and commuter highway vehicles.
In addition, an employer cannot deduct the expenses for providing tax-free qualified transportation fringe benefits. If an employer treats the transportation fringe benefits as taxable W-2 wages to the employee, the employer can deduct the expenses of providing those benefits.
Qualified bicycle commuting reimbursements, previously allowed up to $240 per year, can no longer be provided tax-free. Employers can continue to provide the bicycle benefit as a taxable benefit.
For 2018, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits will be $260 (up from $255). Commuters can receive both the transit and parking benefits (i.e., up to $520 per month). Employers can allow employees to use pretax dollars to pay for transit passes, vanpool fares, and parking.
For more information on this benefit, visit the National Center for Transit Research.
More information on implementing a transit benefit is available from Metro Transit.