How it Works
The federal tax code allows tax-free transportation fringe benefits of up to $260 per month per employee for transit expenses.
The employer can either pay the cost of the tax-free transportation fringe benefit, allow employees to reserve income on a pre-tax basis to cover the cost, or share the cost between employer and employee.
Providing commuter tax benefits to employees can save payroll taxes for employers. The value of the benefit paid to employees is considered a tax-free transportation fringe benefit and not wage or salary compensation, therefore, payroll taxes do not apply.
Employers may set up their own accounting procedures, or use a third party administrator to supply this tax-free benefit.
Applicable IRS Code
Under current law, section 132 (f) of IRS Code, employers may provide employees with the following tax-free benefits:
Third Party Administrators