COMMUTER CHOICE INITIATIVE
What is it?
Section 132(f)(2) sets the maximum benefits at:
relieving employers of many restrictions and filing requirements
What can employers offer?
Tax-Free Benefit — Employers may subsidize transit or vanpool fares up to $230 per month, in addition to current compensation. Employees receive the benefit tax-free. Employers get a full tax deduction and do not pay payroll taxes or other costs on the amount provided.
Pre-Tax Benefit — Employees can use up to $230 per month or $2,760 per year of their gross income, usually before taxes, to pay for transit or vanpool fares. Employers save on payroll taxes and other costs that they would normally pay on the amount set aside by their employees — usually in the range of a 10% savings. Since pre-tax use of employees' salary is not subject to cafeteria-type use and plan restrictions, this program is easy to structure and administer.
Share the Fare — Employers may also combine the two above options. An employer may provide a tax-free benefit of $115 per month and let the employee use $115 of his or her pre-tax salary to pay for the remaining portion of the tax-free amount. In this case, the employer obtains a tax deduction and exemption to avoid payroll taxes for the amount set aside by the employee. The latter savings helps offset the cost of the tax-free benefit.
Who is eligible?
How does it work?
The commuter benefit is usually given in the form of a monthly, annual or single bus/rail pass, and/or monthly vanpool "bucks." Subsidy amount is reported on IRS form 1120-U.S. Corporation Income Tax Return, line 25, Employee Benefit programs.
For more information, call 214-747-RIDE (7433).
