Pre-tax Commuter Benefits
Nick Abel | Pre-tax Specialist
Schedule a free consultation with me at 206-613-3233 or
Pre-tax commuter benefits are a simple and great way for employers to help their employees save on their commuting costs. Employers can provide employees the option of taking pre-tax deductions from their paycheck each month to put toward qualified commuting expenses, reducing their taxable income. In addition to saving employees hundreds of dollars, employers can also save as much as 9% on payroll taxes, making pre-tax benefits a win for everyone!
A few advantages of offering pre-tax deductions:
- Offering commuter benefits improve hiring and retention of highly skilled employees
- Promotes the use of transit, freeing up parking and reducing congestion around your
- Saves your employees up to 40% on their commuting costs
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If you’re a business already providing an ORCA or another transit pass to your employees and subsidizing part of the costs, you can save yourself and your employees even more by offering pre-tax deductions.
Pre-tax deductions are a great addition to ORCA Passport or Choice accounts, allowing employers to subsidize their desired amount while saving themselves and their employees on their taxes.
If you’re an employer who wants to save employees money on their commutes but aren’t sure where to even start, we can help.
Commute Seattle can help you find the right program for your business’ needs. If you’re interested in learning how your company can start offering pre-tax benefits, reach out to Nick Abel at 206-613-3233 or email him at Pre-Tax@commuteseattle.com.
Frequently Asked Questions
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Commuter benefits are codified in Internal Revenue Code Section 132(f) as, “Qualified Transportation Fringe”. They’re intended to encourage the use of alternatives to driving alone to work to reduce congestion and improve accessibility to downtown businesses. Employers can subsidize their employees’ commuting costs, allow employees to use their salary to pay for these expenses on a pre-tax basis or share the cost of their employees’ commuting expenses through a combination of an employer subsidy and an employee paid pre-tax payment.
Public transit—bus, ferry, commuter train, light rail and streetcar. Parking expense, and vanpool, including but not limited to, Uberpool and Lyft Line. The monthly pre-tax limit is $260 for transit and $260 for parking, for a total of $520.
A pre-tax deduction is an employee paid payroll deduction. It’s a federal transportation benefit that allows employees to set aside up to $260 a month to use on qualified commuting costs. By deducting this amount before taxes, the employee’s taxable income is decreased, thus lowering the taxes they pay.
If the employee uses a portion of their salary to pay for an eligible commuting expense, that amount up to the monthly limit is exempt from payroll taxes they would normally pay. This includes estimated federal income tax as well as Social Security and Medicare taxes (FICA taxes). Similarly, employers do not pay taxes on any amount set aside by their employees for this benefit.
Yes! For any partial subsidy of your employee’s commuting costs, combining it with pre-tax deductions will save them and your business even more money.
There’s no minimum, except for ORCA Passport. Learn more about ORCA Busines Passport.
The first step is choosing the best options for your business and your employees. Commute Seattle can help you with this! Either schedule a free consultation or view our Tax-Free Toolkit to consider your options.
The City of Seattle has passed a Commuter Benefits Ordinance, which becomes effective on January 1, 2020. Businesses with 20 or more employees will be required to offer their employees the opportunity to make a monthly pre-tax payroll deduction for transit or vanpool expenses. Learn More about the Ordinance.
That’s the best part—Pre-tax benefits are almost always cost-neutral or cost saving for your business! The more your employees participate in this benefit, the more your company saves.