An employer can establish two types of commuter benefits so that employees can pay on a pre-tax basis for their parking and/or mass transit costs: a qualified parking benefit and/or a transit pass benefit. Employees can contribute up to the IRS maximum monthly amount ($270 for 2020, indexed annually) to pay for parking at or near their employer’s place of business and/or a location from which employees commute by vanpool, carpool or in a commuter highway vehicle. Mass transit benefits can reimburse up to the same IRS monthly maximum as qualified parking and can be used for commuting to work from, mass transit facilities—bus, subway, railway–or commuter highway vehicles eligible for use in vanpooling.
In many large cities, employers with some varying minimum number of employees are required to provide these commuter benefits.
The 2017 Tax Cuts and Jobs Act (TCJA) made significant changes to these benefits. The most important was a change to when an employer could deduct the costs of these pre-tax benefits as it does with most all other employee benefits it provides. If an employer allows employees to pay for parking on a pre-tax basis, for example, it is unable to deduct that expense. There are even special rules that apply to not-for-profit organizations. Kushner can expertly assist you in designing and administering these commuter benefit programs.