COMMUTER TAX BENEFITS PROGRAM
Commuting to work can be expensive. Those employees using commuting by vanpool or public transit may be eligible for a significant tax savings on their commuting costs through the Commuter Tax Benefits Program. Employers benefit too, by saving money on payroll taxes. The IRS permits employers to assist employees who vanpool or use public transit, as follows:
- By setting up a pre-tax payroll deduction system for commuting costs; reduces tax payments for employee and employer (most popular amongst employers)
- By contributing directly to the cost of the employees’ commute; tax free for employee and tax deductible for employer
- A combination of the above.
The Commuter Tax Benefit Program is available through most payroll companies and is easy to set-up in-house if a private payroll company is not used. Cross County Connection can provide assistance in setting up the program. Cross County Connection will also market the program to employees and assist with the enrollment process.
How the Program Works:
- Employee—Federal Income Tax, Social Security and Medicare payroll Taxes
- Employer—Matching share of Social Security and Medicare Taxes
Additional Commuter Tax Benefits:
- An employee who pays to park at a qualified parking area, such as a train station, and then takes public transit or a vanpool to work can receive a combination of the transit benefit and parking benefit up to $380 per month.
- The IRS permits employers to reimburse employees up to $20 per month for reasonable expenses related to commuting by bicycle.
Commuter Tax Benefit Program Example*
- Employee’s public transit commutation cost is $130 per month which is IRS cap
- Employee in 25% tax bracket
- Social Security and Medicare tax rate is 7.65% for both employee and employer.
Tax Savings for Employee: $509 per year ($390 saved in Federal Taxes + $119 saved in Social Security and Medicare taxes). Tax Savings for Employer per participating employee: $119 per year (employer’s portion of Social Security and Medicare taxes.) *Calculations based on 2015 allowance assumptions
The region’s original commuter benefit program, RideECO, is now part of the Edenred Commuter BenefitsTM program. On March 31, the RideECO program was acquired by Edenred.
DVRPC has administered the RideECO program for the past 29 years. It allows employers and commuters to save by putting pre-tax dollars toward fares on public transportation and vanpools. Currently, hundreds of employers and thousands of employees participate in RideECO.
Edenred has been a long-time partner on the RideECO program, handling the order fulfillment functions for employers, and distribution functions for RideECO Select participants. Edenred also operates its own commuter benefit program with many of the same options RideECO offers, and more. DVRPC believes this is an opportune time to provide more options for our customers and fold the regional RideECO program into a broader program with a national scope.
This transition will take place over the next few months. Employers and commuters who are using RideECO will have a seamless transition to the new order and customer service platforms. Read the full press release at DVRPC’s newsroom. Learn more about RideECO and Edenred Commuter Benefits at www.RideECO.org and www.commuterbenefits.com.