Tax Code Information

What are Transportation Fringe Benefits?

The U.S. Internal Revenue Service Code Section 132(a) outlines specific fringe benefits that employers may provide to their employees. These benefits can be deducted from an employee's gross income (prior to taxation), thus helping both the employer and employee save on taxes as neither pays federal income or payroll taxes on them. One such benefit is the Qualified Transportation Fringe Benefit (Section 132(a)(5); Section 132(f)). The Federal tax code allows employers to provide tax-free transit, vanpool, and/or parking benefits to their employees in one of three ways:

  • Employer covers the full cost of the qualified transportation fringe benefit - subsidy / incentive program.
  • Employer allows employees to reserve income on a pre-tax basis to cover the costs of a qualified transportation fringe benefit - employee paid pre-tax.
  • The employer and employee share cost of the transportation fringe benefit - combination subsidy/incentive & employee paid pre-tax.

The tax-free limits for transportation benefits for the calendar year beginning January 1, 2018 will grow to $260.00 per month for transit and $260.00 per month for parking. The bicycle commuting benefit remains $20.00 per month.

The tax information contained on this website does not represent any professional description of the tax laws affecting transportation fringe benefits, and such information is presented without any representation or warranty, express or implied, as to its accuracy or completeness. Accordingly, users of the website are cautioned to obtain competent professional advice from their own tax advisors regarding such laws.

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