Tax Benefit Programs*

With a Commuter Tax Benefit Program employers save on payroll taxes while providing their employees with a valued benefit that cuts the cost of their daily commute. Federal tax code allows tax-free transportation fringe benefits of up to $125 per month per employee for transit or vanpool expenses and up to $240 per month for eligible parking. There are a few different ways in which an employer can offer these benefits:

Employer-Paid Transportation Benefits. Employers get a tax deduction for the expense and enjoy savings on payroll-related taxes. 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. Giving an employee $125 in monthly transit/vanpool benefits is thus less expensive for an employer than raising the employee’s salary by $125 a month. The company-paid benefit, at $1,150 a year, has the same value to employees as a $2,30 raise.

Employee-Paid, Pre-Tax Transportation Benefits. Employees are allowed to set aside up to $125/month of pre-tax income to pay for transit or vanpooling. Employees receive more money from transportation benefits than from a comparable salary increase since they do not pay federal income taxes. Employers save money since the amount set aside is not subject to payroll taxes. As a pre-tax payroll deduction, it provides annual savings up to $600 for employees, and $135 per participant for employers.
Shared-Cost Transportation Benefits. Employers can share the cost of transit or vanpool costs with employees—and everyone can receive valuable tax savings. With this approach, employers can provide a portion of the cost of taking transit or vanpooling as a tax-free benefit and allow the employee to set aside pre-tax income to pay for the remaining amount of the benefit.

Additionally employers in the state of Georgia can receive additional benefits. For more information go to
Downtown Green Source is happy to come to your worksite to explain each one of these benefits and how they can help boost employee morale while providing a benefit to the employer. For more information, please contact Crystal Clark 404.658.1877 or email More questions? Please go to our frequently asked questions page.

*Qualified parking. – The term “qualified parking” means parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by transportation described in subparagraph (A), in a commuter highway vehicle, or by carpool. Such term shall not include any parking on or near property used by the employer for residential purposes.

IRS Publication 15-B, Employer’s Tax Guide to Fringe Be

Note: The information presented here does not constitute official tax guidance or a ruling by the U.S. Government. Taxpayers are urged to consult with the Internal Revenue Service of the U.S. Department of Treasury or a tax professional for specific guidance related to the Federal tax law.