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), to provide tax incentives to employees to encourage mass transportation.
- Significant tax savings for employees as a pre-tax benefit
- Tax savings for employers as they save on payroll taxes
- 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.
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