Commuter Benefits
Commuter benefits are pre-tax deductionsemployers offer to help cover transit or parking costs, reducing employees’ commuting expenses and taxable income.
What types of expenses are covered under commuter benefits?
Commuter benefits can cover costs for public transportation (such as buses, trains, and subways) and qualified parking. Some programs may also include bicycle commuting expenses, depending on the company policy.
Are commuter benefits taxable for employees?
No, commuter benefits are generally not taxable up to a specific IRS limit. The IRS sets monthly caps on the amount of pre-tax contributions employees can make for transit and parking. When offered through a pre-tax program, these benefits reduce an employee’s taxable income, creating tax savings for both employees and employers.
How do employers administer commuter benefits through payroll?
Employers typically offer commuter benefits as a payroll deduction, allowing employees to set aside pre-tax dollars for eligible commuting expenses. The amount is deducted automatically each pay period and can be adjusted based on commuting needs.
Dive Deeper with Justworks’ Resources
Get a closer read on relevant topics related to benefits, payroll, HR, compliance, and more.
