Employee Work Experience Matters
Work practices are evolving as standards and norms are re-envisioned in today’s new normal. Whether your employees are working remotely or commuting, Get There Oregon and our partners can help your organization get ahead:
- Boost employee engagement
- Increase productivity & morale
- Improve health & wellness (both mental and physical)
- Attract and retain talent
- Reduce direct costs, such as the need for mass parking
- Make Oregon better through reduced traffic congestion and, in turn, air pollution
- Realize tax benefits, like the ones below
The Federal tax code allows the use of tax-free dollars to pay for transit commuting and parking costs through employer-sponsored programs. Commuter tax benefits are regulated by the Internal Revenue Code, Section 132(f)—Qualified Transportation Fringe.
The tax code allows tax-free transportation fringe benefits of up to $300 per month per employee for transit expenses and up to $300 per month for qualified parking. Qualified parking is defined as parking at or near an employer’s worksite, or at a facility from which an employee commutes using transit, vanpool or carpool. Commuters can receive both the transit and parking benefits.
Companies can offer:
- A tax-free, employer-paid subsidy
- A pre-tax, employee-paid payroll deduction
- A combination of both of the above
Employees who set aside income on a pre-tax basis for a qualified transportation fringe benefit do not pay federal income or payroll taxes on the income set aside. For example, if you have a combined (local, state, federal) tax rate of 40% and spend $130 per month on public transportation fares, you will save more than $600 per year. Qualified parking adds even more savings. If an employer chooses instead to subsidize the benefit it is actually more valuable than an equivalent raise because of the tax advantages.
Providing pre-tax 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 can save roughly 7.5% in payroll taxes on the amount employees set aside. If the employer chooses to offer the benefit in addition to the employee’s monthly salary, giving an employee $255 in transit benefits is less expensive for an employer than increasing the employee’s salary by $255.