Under the US federal tax code section 132(f), commuter benefits are a type of fringe benefit that is not taxed as income.
Commuter benefits allow employees to pay for commuting expenses with non-taxed dollars. As of 2020, commuters can elect up to $270 monthly to each parking and public transit costs. They won’t be taxed on these dollars as income, saving them up to $216 in taxes each month, and saving their employer on payroll taxes, too. While all employers have the option to provide this benefit to their employees, some cities and states mandate it. Click here to learn about commuter benefits regulations in your area.
Commuter benefits are an essential component of a competitive benefits package for a forward-thinking company. Nearly one in four employees has quit a job because of commute dissatisfaction. Offering pre-tax benefits and transit subsidy is a great first step toward a holistic commute program that brings flexibility, simplicity, and savings to the beginning and end of every workday.
With Luum’s commuter card, employees can use their pre-tax transit dollars to buy transit passes, pay commuter rail fares, or take a vanpool, their pre-tax parking dollars to reserve and pay for parking. Employees save on income tax, employers save on payroll tax, and enterprise commuters gain flexibility and daily choice — everybody wins.
Below are some frequently asked questions about pre-tax commuter benefits.
Can I redeem my commuter benefits for cash?
No, Commuter Benefits cannot be redeemed for cash.
Can I use my Commuter Benefits for Uber, Lyft, and other rideshare services?
Uber and Lyft rides are not currently supported Commuter Benefits purchases. In the meantime, we recommend checking out your organization's commute website for the commuting options available to you.
Can I use my Commuter Benefits to pay for tolls & gas?
Bridge tolls, road tolls, and gasoline are not eligible expenses to be covered by your Commuter Benefits.
How do Commuter Benefits work?
Commuter Benefits allow employees to allocate pre-tax dollars from their paycheck to be used for commuting expenses. Employees are able to elect the amount of pre-tax dollars to allocate for their Commuter Benefit, up to the IRS limit of $270 per month. In some cases, employers also subsidize additional funds for employee commuting costs each month.
How do I get my Commuter Benefits?
After making your benefits election on your employer's commute website, your benefits are accessible at the beginning of the following month.
How do I use my Commuter Benefits?
Use your Commuter Transit Card to purchase transit fare and passes at any qualified transit terminal that accepts Visa. Please note, your Commuter Transit Card cannot be used for Lyft, Uber, or other rideshare services.
Use your Commuter Parking Card to purchase parking at any qualified parking terminal that accepts Visa.
What is a Pre-tax Election?
A pre-tax election is specific amount of money you determine to be take out of your paycheck on a pre-tax basis, to be used for your commuting expenses. According to the US Tax Code, participants are able to elect up to $270 for their pre-tax election.
Can I get a refund on Pre-tax funds?
Per the guidelines from the IRS, pre-tax funds are non-refundable after the election period in which you made the pre-tax election closes.
What is an Employer Subsidy?
An employer subsidy is an additional benefit that some employers offer in the form of employer-provided money that may be used for commuting expenses.