What is a pre-tax commute benefit?
The IRS Code, section 132(f), allows employees to use pre-tax salary towards their transit and vanpool commuting costs.
Commuter benefits, or transit benefits, are an employer-provided package that helps offset the cost for employees to get to work. Like a Health Savings Account, retirement plan and other benefits, commuter benefits are a tax-savvy, morale-boosting, mobility-centric way for employees and employers alike to choose smarter commute options and save money.
Commuter benefits include parking benefits, transit benefits, vanpool benefits and bicycle commuting benefits.
How does it work?
When an employee enrolls in a pre-tax commuter benefits program, they will provide the amount of their monthly commuting cost for transit and/or commuting-related parking up the monthly limits.
The tax-free commuting dollars are provided to the employee in a product, such as a voucher, smart card, debit card, etc., to cover all commuting options. Currently, employees can use up to $270 a month for transit, and the same amount for commuter-related parking.
Can this benefit the employer too?
Yes! By offering employees a pre-tax commuter benefits program, the cost of commuting deducted for employees reduces the amount of payroll being taxed.
What qualifies as transportation fringe benefits?
- Commuter transportation in a commuter highway vehicle
- Transit passes
- Qualified parking
- Qualified bicycle commuting expenses.
Is this a tax write-off?
No, it’s not.
Is the pre-tax transit and vanpool benefit the same as a transit or vanpool subsidy?
No. The pre-tax transit and vanpool benefit uses the employee’s own salary before taxes to pay toward the commute funding. A transit or vanpool subsidy is when the employer provides employees with a transit or vanpool benefit above and beyond the employee’s salary.
Are there benefits for cycling?
Earlier this year, a revamped Bicycle Commuter Act was introduced in the US House of Representatives. It would ensure bike commuters get pre-tax commuter benefits similar to those who drive and park or take public transportation to work.
In 2017, Congress eliminated a tax credit for bike commuters which allowed employers to reimburse workers as much as $20 per month, pre-tax, for bike commuting expenses.
If the bill passes, it will make the benefit a pre-tax benefit, allow employees to receive a bicycle benefit of up to 30% of the parking benefit, allow the bicycle benefit to be used in concert with the transit and parking benefits and add bike-shares as eligible for the benefit, clarifying that e-bikes are eligible.
What is vanpooling?
Vanpool is a perfect way to get to and from work for those who travel more than 15 miles to work one-way. Passengers share a ride in a van that seats five to 15 people and pay a monthly fee that covers the cost of fuel, insurance and vehicle maintenance.
Vanpooling helps reduce the number of vehicles on the road!
Is there a pre-tax benefit for vanpooling?
Yes! The IRS allows employers to withhold a set amount of employee’s pre-tax income for vanpool commuting costs. This lower’s the employee’s taxable income, which puts more money into their pocket.
Employees may also provide a monthly fare subsidy as part of the qualified IRS Transportation Fringe Benefit, under section 132(F) of the IRS tax code.
What are the tax benefits for Boulder County residents?
- The University of Colorado-Boulder offers a $25 monthly incentive for employees who vanpool.
- The City of Boulder offers a $20 monthly incentive for Boulder residents or employees who vanpool.
- Boulder County offers a $70 monthly incentive for Boulder County employees who chose to vanpool as well as offering priority parking.
- For vanpoolers within the North Front Range, and use VanGo, can receive up to $260 for commuting costs. The cost will be taken out of the paycheck prior to taxes.
What are the tax benefits for Broomfield County residents?
The City and County of Broomfield offers voluntary pre-tax savings plans to full-time and eligible part-time employees for health, dependent care and transportation expenses.
- Broomfield County offers up to $225 per month, with no annual max, for vanpool or bus passes for its maximum annual contribution. Employee contribution is up to $225 per month.
- For vanpoolers within the North Front Range, and use VanGo, can receive up to $260 for commuting costs. The cost will be taken out of the paycheck prior to taxes.
Commuting Solutions can help your business get started with a vanpool! For more information, contact us at info@commutingsolutions.org.
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The VanCool program was inspired by our mission to reduce traffic congestion and improve air quality throughout the Denver Metro region.
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For the better part of the last year, the Commuting Solutions team has been building from the ground up Colorado’s first casual carpool program that will operate on the US 36 corridor. As part of preparing for this program, our team has extensively researched existing examples nationwide, particularly in Washington D.C. and San Francisco. With the launch of our Casual Carpool on US 36 program, we want to share all that we’ve learned with you so you can join us in our excitement to pilot Colorado’s first casual carpooling program for the US 36 Express Lanes.
Riders and drivers have the right to opt out of the carpool at any point. If you show up on the day of your carpool and you get a gut feeling that makes you uneasy, as a rider you can not get in the car and as a driver, you have the right to not pick up your passenger.
