Tax Advantages and the Law
Using SmartBenefits® to offer qualified transportation fringe benefits for commuting is like putting money in the bank. Employers save on payroll related taxes. Employees save on income taxes.
"You can generally exclude the value of transportation benefits that you provide to an employee during 2017 from the employee's wages up to the following limits:
- $255 per month for combined commuter highway vehicle transportation and transit passes [including Metro's SmarTrip® smart cards].
- $255 per month for qualified parking." 1
Both amounts will increase to $260 for taxable years beginning in 2018 per IRS Revenue Procedure 2017-58 Section 3.17. The 11/02/17 version of the House tax reform bill essentially preserves the transit benefit. Only employers who subsidize their employees’ transportation expenses may be effected. Those employers would no longer be allowed to 'write-off' subsidized transportation expenses. However, all employers would continue to enjoy payroll tax benefits from providing the transportation fringe benefit (both as a subsidy or pre-tax). Source: Association for Commuter Transportation.
As the tax saving scenarios below illustrate, employers might offer an Employer Paid Direct Benefit valued at $4,100 for a net cost of just $2,800. Alternatively, at no cost to the employer, a Pre-Tax Salary program may save employers over $400 per participating employee and may save employees over $1,700 each year. A combined employer paid/pre-tax program is also possible. No matter how you offer it, SmartBenefits® is a powerful tool for helping employers recruit, retain, and motivate employees.
SmartBenefits® Tax Saving Scenarios
- Employer Paid Direct Benefit Tax Advantages of SmartBenefits®
- Pre-Tax Salary Tax Advantages of SmartBenefits® Transit
- Pre-Tax Salary Tax Advantages SmartBenefits® Parking
- 1 The Transportation (Commuting) Benefits section starting on page 19 of IRS Publication 15-B (2017) describes the qualified transportation benefits that employers may offer under the Internal Revenue Code (26 U.S.C. Section 132(f)). https://www.irs.gov/pub/irs-pdf/p15b.pdf
- Qualified transportation benefits include providing a transit pass benefit. The definition of a transit pass includes smart cards like Metro's SmarTrip® card as described in IRS Revenue Ruling 2014-32 .