Transportation and parking are employer provided voluntary benefit programs which allow employees to reimburse their monthly commuting expenses, vanpooling and/or related parking costs with pre-tax withholdings. This benefit was established in 1993 as part of the federal tax code section 132(f),[4] to provide tax incentives to employees to encourage mass transportation.

Benefits

• Significant tax savings for employees as a pre-tax benefit
• Tax savings for employers as they save on payroll taxes

Examples

• An employer financed tax-free fringe benefit by which a company pays directly for the cost of an employee's use of public transportation or parking (up to the designated tax-free maximum), and the value of such benefit is not added to the employee's gross income.
• An employee financed commuter benefit in which an employee designates a portion of salary before taxes (pre-tax income) to pay for qualified transit, vanpooling, or parking expenses (up to the IRS allowable monthly maximum).
• A combination of the previous two options in which a portion of the benefit is funded through a tax-free fringe benefit, with the remainder funded with pretax income of the employee, provided the aggregate does not exceed the monthly statutory limits.