Commuter Choice Tax-Free Benefit

Commuter Choice refers to recent changes in the Internal Revenue Code [26 USC 132 (f)] that permits employers to offer employees a tax-free benefit to commute to work by vanpool or public transit. There are several ways that employees may receive the benefit. The most attractive option to employees is for the company to cover the full cost of the transit benefit. Some companies offer the Commuter Choice benefit as a low-cost salary or wage enhancement. Others elect to provide a partially subsidized benefit in addition to their employee's current salary. The benefit would be free of all payroll and income taxes to your employees and the employer would deduct the cost from their business income taxes.

A second option is to offer Commuter Choice as a pre-tax benefit. You may permit your employees to have up to $65 per month taken out of their current monthly pay, towards the actual cost of commuting on transit or in vanpools before taxes are applied. Many employers prefer this option because the employee pays the cost. The employer’s share of FICA and unemployment taxes are also reduced. It's great for employees and it saves you money.

Third, you may share the cost of commuting with your employees. You may elect to pay for a portion of the taxfree transit benefit and allow your employees to pay the balance of the costs by having their share taken out of their salary before taxes. In each case, however, the total maximum amount eligible as a tax-free benefit is $65 per month, even when an employer and an employee share the costs.

For complete details about the Commuter Choice program see the Federal Transit Administration's website at www.fta.dot.gov and select Commuter Choice for further guidance or call Valleyrides.com for written information.