However, the Tax Cut and Jobs Act of 2017 eliminated the transit deduction for employers. Employees can use funds to cover transportation expenses and parking expenses. Also, aligning commuter benefits with the company’s values and strategic goals is a key consideration. Commuters in the U.S. spend around $8,466 on their commute every year, which is about 19% of their annual income.1 That makes commuter benefits all the more essential.
How much can I contribute to my commuter benefits account?
You can reimburse your employees for any transportation expenses with a stipend, including those not listed in Publication 15-B, as a taxable benefit. You can also set up stipend reimbursement to be tax-free for qualified expenses. You should consult with a tax professional to determine the taxability of your commuter benefits program. Any organization with 20 or more full-time employees must offer commuter benefits.
For Employees
In the UK it’s something around £100 per month, while in other European countries like Spain, they could spend around €50 per month. That number can go higher if we consider those employees using their own cars to go and come back from work due to the gas costs. If you’re doing it alone, think about whether you have time for setup and administration or if you’d rather use an outside service to manage it. Even with the remote work revolution, plenty of people still travel daily to a job site or office. With transportation prices continuing to rise, commuter benefits are always welcomed. This article explains commuter benefits and how employees can use them along with answers to common questions about this valuable job perk.
However, there may be specific limitations when using your commuter benefits to pay for ride shares. Consult with your employer to find out what those limitations might be. Typically, employers include these plans in their benefits package, but some local governments also offer commuter plans to businesses. Employers also enjoy significant savings with commuter benefits. Employers save about $40 per month for each employee who participates in the program.
Bike-to-Work Programs
The IRS administers the law that allows employers to give employees “fringe” benefits. The commuter benefit is considered a qualified transportation benefit under the law. So, any business in the United States can offer commuter benefits by following IRS guidelines. There are existing commuter benefit laws on the books that mandate how programs should be set up locally. Performing a cost-benefit analysis of commuting costs is essential to determine the financial feasibility of offering commuter benefits.
Brush up on this pre-tax benefit; the only benefit where employees and companies save. Employee benefits can help improve employee morale and engagement, reducing employee turnover. When your employees feel appreciated and taken care of, they’re more likely to be satisfied with your organization and less likely to look for a new job.
Sharing Economy
If an employee paid for an expense that’s covered by their commuter benefits, they can submit a claim to their commuter benefits administrator for cash reimbursement. A couple of examples of this would be if their card was declined at a parking meter or station, or if they accidentally left their card at home. Generally, employees can’t use commuter benefits funds to pay for tunnel, bridge or highway tolls (E-ZPass).
A Comprehensive Guide to Ensuring Accessibility for Employees with Disabilities
While the IRS and local governments generally only allow qualified commuter benefit purchases for public transportation, parking, and vanpooling, you can provide other commuter benefits. Many commuter benefit TPAs offer employee after-tax contributions for excess amounts. These 2025 limits are each up $10 from the 2024 transportation expense and parking expense limit of $315. Again, you and your employee’s combined contributions can’t exceed $325 per month in 2025. However, your employee can elect to enroll in both commuter benefit plans (transportation and parking), if applicable. Employers and employees can contribute to an employee’s commuter benefits plan.
- For charities, the rate is 14 cents per mile, and for medical usage or military moves, it is 21 cents per mile.
- Here’s an overview of how a commuter benefit plan is set up and executed.
- This article will explain commuter benefits, how different types of benefits work, and what expenses you can use them for.
May an employer choose to impose substantiation requirements in addition to those described in this regulation? Just as workers can save money on commuter benefits plans, employers can save on payroll taxes and employee contributions. These savings can add up quickly, especially for growing or large businesses. Employers can also save on parking lot expenses, including leasing and maintenance. Transit passes are a popular form of commuter benefit where employers provide employees with pre-tax transit passes or reimbursements for public transportation expenses.
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Take advantage of credit card points
However, your combined contribution must be below the IRS contribution limits, explained later. Regarding the small business employee benefits, it can be a highly feasible and advantageous decision to offer transit commuter benefits. Understanding how do commuter benefits work and the range of options available can help small businesses implement effective commuter assistance programs without overwhelming their budgets.
- After you set up the program, employees must enroll to receive benefits.
- For employers and employees, benefits that qualify as transportation fringe benefits are not a part of an employee’s taxable wages.
- Commuter benefits plans offer considerable benefits to companies as well.
- In the UK it’s something around £100 per month, while in other European countries like Spain, they could spend around €50 per month.
Your card’s interest rate is likely way more than the percent in cash back you could earn. Some carpooling setups are obvious—your work bestie who lives around the corner. But in many cases, it may take some extra organizing to fill a car. Other carpoolers don’t even have to work at your company or in the same building as long as their workplace is on the way. Just be upfront about expectations around splitting gas, tolls, and parking; pickup and dropoff times (and what happens if someone’s running late); and sharing chauffeuring duties.
Certain credit cards give more rewards or cash back on travel expenses—commuting costs included. But even if your card doesn’t offer extra points for travel, using any rewards card could mean saving a couple percentage points of your total commuting cost. Of course, never charge more on your credit card than you can pay off when the bill comes due.
You can also offer a single allowance for all transportation expenses. This gives your employees more freedom to use their commuter benefits the way they want to. PeopleKeep’s 2022 Employee Benefits Survey found that 82% of employees said an employer’s benefits package impacts whether they accept a job.