Tax Benefits
How it Works
The federal tax code allows tax-free transportation fringe benefits of up to $260 per month per employee for transit expenses.
The employer can either pay the cost of the tax-free transportation fringe benefit, allow employees to reserve income on a pre-tax basis to cover the cost, or share the cost between employer and employee.
Providing commuter tax benefits to employees can save payroll taxes for employers. The value of the benefit paid to employees is considered a tax-free transportation fringe benefit and not wage or salary compensation, therefore, payroll taxes do not apply.
Employers may set up their own accounting procedures, or use a third party administrator to supply this tax-free benefit.
Tax Benefits
- Employers may provide up to $260 a month to their employees as a tax-free benefit to commute by transit or vanpool.
- Employers may pay the commuting cost or allow employees to use their own salary on a pre-tax basis to purchase transit or vanpool services.
- Wageworks and Commuter Checks are two popular programs used by Rhode Island employers to offer these benefits.
- Talk to your employer and see if these benefit programs are already in place.
- For more information, or to discuss introducing this type of program at your workplace, call a Commuter Resource RI customer service representative at 401-784-9575.
Applicable IRS Code
Under current law, section 132 (f) of IRS Code, employers may provide employees with the following tax-free benefits:
- Up to $260 a month for transit or vanpool commuting expenses.
- Transit and vanpool benefits must be provided in addition to compensation. Employees may not choose between receiving either benefit or salary.
Third Party Administrators