With the high price of gas, wouldn’t it be nice to see a tax benefit to help reduce the cost to get to and from work? Perhaps there is, you may just need to check with your employer.
$3.40 to $4.00 per gallon gas prices are quickly becoming the new norm. Congress and the President appear to be doing very little to control this inflationary cost. What can you do? Thankfully there are commuting benefits that can lower your cost of getting to and from work during 2013.
Transit Passes: up to $245/ month Van Pooling: up to $245/month Parking Allowance: up to $245/month Bicycle Commuting: up to $20/month
How it works
Your employer can provide you the benefits listed above and you do not have to report the benefit on your income tax return. Because the benefit does not hit your W-2, you pay no federal tax, no state tax, no Social Security or Medicare.
- Transit AND parking. Transit passes are good for the train, subway and bus systems and can be used in addition to parking passes. So you can park at the train station, receive a parking allowance AND receive the transit pass benefit.
- Employer-provided. Remember these benefits are employer-provided benefits. Check with human resources to see if your employer provides these benefits.
- The salary-reduction alternative. If your employer does not provide these benefits they might allow you to reduce your take-home pay instead. If allowed by your employer, you set aside money from your wages to pay for the passes or parking allowance. This salary-reduction would then allow you to pay for your commuting costs up to the limits in pre-tax dollars. You may not use this method to pay for bicycle commuting.
- Bicycle commuting only. You may use the $20/ month benefit to help pay for the repair and maintenance on your bike, however you may not receive this benefit in any month that you also receive other transit benefits.
Many employees are unaware that their employer provides a transit benefit, so check it out. Even if they do not, perhaps they’ll consider creating a salary-reduction alternative instead.