Tax Incentives for Commuters: A Direct Dividend for Businesses

Tax Incentives for Commuters, Charter Bus Rental Houston

Tax Incentives for Commuters: A Direct Dividend for Businesses

In addition to benefiting your employees, offering commuter benefits can have economical conveniences for your company. Tax incentives granted by federal and state governments make it easier than ever for businesses to pursue transportation-related perks.

Federal Qualified Transportation Fringe Benefit
The benefit program also applies to parking and bicycling costs. (Refer to IRS Guidance and your company tax advisor for in-depth information).

The value of any commuter benefits given by an employer to employees is excused from withholding and employment taxes and is not reported as a taxable amount on the employees’ W-2 form. The value of these benefits is also deductible as an employer-provided benefit from the employer’s gross profit.

Ways to Offer the Commuter Tax Benefit.
The Commuter Tax Benefit applies only to work-related trips managed a federally defined commuter vehicle, involving bus, rail, subway, ferry, subscription bus, or shuttle. Also included is a vanpool that has seating capacity of approximately 6 adults plus the driver and has at least 80 percent of its mileage used for commuting.

Employers can design their commuter benefit program in one of three approaches:
– Benefits along with salary: Employers can provide each employee with a transit pass, vanpool voucher, or similar item entitling them to transportation on a transit vehicle or a vanpool. In minimal cases, they can provide cash reimbursement for these varieties of latest information on the commuter tax benefit is available at the National Center for Transit Research. When no pass, voucher, or comparable item is available and when use is strictly substantiated, commute. Your business can deduct commuting subsidies as a normal business expense; that value of the subsidy is nontaxable to the employee.
– Employee pre-tax set-aside: Employers may reserve an employee’s pre-tax income amount used for qualified commuting expenses before calculating payroll taxes. Employers also pay employment taxes only on the lessened amount of the employee’s salary.
– Mixture of reimbursed benefits and pre-tax set-aside: Employers can choose to pay part of an employee’s commuting costs, reducing that amount as an employee benefit, and after that deduct the remaining cost up to $245 per month per employee from an employee’s salary before calculating taxes.

Qualified Parking Benefit.
Employers can also choose to help cover employees’ cost of parking at a lot where they commute to work by a vanpool, carpool or public transit in one of three ways:.
– Spending for their parking directly.
– Deducting the cost of the parking pre-tax from the employees’ salary.
– A combination of both, up to a maximum of $245 per month per employee in 2013.

Employers who offer parking on or near the business work premises can deduct the cost of that parking.

Qualified Bicycle Benefit.
As of January 2012, employers may also provide reimbursements of up to $240 per year ($20 a month) for reasonable expenses incurred by an employee for the purchase, maintenance, and storage of a bicycle used to commute to work. However, reimbursement for bicycle commuting is not available for employees who already accept a parking or transit subsidy. Unlike the other qualified transportation fringe benefits, a qualified bicycle commuting reimbursement benefit cannot be financed through employee pre-tax income.

State Tax Incentives.
Maryland and Minnesota help businesses to claim a tax credit for amounts they pay toward employee commuting costs. In Maryland, businesses can claim a tax credit for 50 percent of the suitable fees of providing eligible commuter benefits up to a maximum of $50 per employee per month. In Minnesota, employers that purchase transit passes to give or resell to their employees may be eligible for a 30 percent state tax credit.

Before implementing any kind of commuter benefit program, consult your tax advisor.