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 $270 per month per employee for transit expenses and up to $270 per month for qualified parking. Qualified parking is defined as parking at or near an employer’s worksite, or at a facility from which employee commutes via 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.
In the Get There tool, networks are an administrator and/or user defined group of users. For example, you can set up a network of employees or a sub network for employees who work in a specific department. With networks, you can increase engagement through offering additional incentive opportunities to your employees, contact employees in your network directly, and host commuter challenges to motivate employees to try new commute options. Learn more about the benefits of setting up a network here. To set up a network contact us at [email protected] or 503-200-3280.
Flexible work arrangements have become a viable transportation demand management strategy with advancements in technology and improved communications. A flexible work arrangement involves working from home, or any schedule that differs from the typical 9am-5pm, 5 days per week schedule. This includes starting earlier/later or a compressed work week (such as four ten-hour shifts each week).
Employers can use this guide to understand national and local trends in the workplace, benefits of flexible workplace arrangements, and key components for getting started with a flexible workplace program. Click here for the full guide.
Employers across Oregon have found that offering transportation benefits and strong commuter support systems can help with employee recruitment and retention. Investing in employees’ physical and financial health and well-being will save employers time and money in the long run.
Implementing and sustaining employee transportation programs can be easy if you have the right tools. This toolkit is meant to provide guidance and support to those interested in creating an employer transportation program or as a reference for evaluating or improving existing programs.
People in the following roles may find this toolkit most helpful:
- Employee transportation coordinator (ETC)
- Human resources (HR) representative
- Facilities or parking management representative
- Business owners
- Sustainability program representative
- Transportation enthusiast
- Anyone interested in employee wellness or transportation options