The stimulus package stipulates certain provisions for employer-provided commuter benefits. This plan increases the amount of mass transit and vanpool benefits that can reduce an employee’s gross income and thereby reduce tax liability overall. This law is in effect from February 2009 through the end of the 2010 tax year.
According to the Employee Benefits Research Institute, American companies will spend $470 million on employer-provided transit passes and nearly $3.1 billion on employee parking expenses in 2009. When you begin to work for a new employer, it is important to take commuter and transit benefits into account, particularly if you live in a major urban area such as New York or Los Angeles. The cost of parking, commuter rail rides, buses or vanpool services can add up quickly, and you don’t want to end up paying a large part of your salary for transit if you don’t have to.
The federal government commuter tax program can help you save up to 40% on your transit costs. This federal tax code gives employers the opportunity to provide subsidized and non-subsidized tax-free transit resources to employees. These include mass transit, vanpool and parking benefits. Through this program, employees can save money on income tax and FICA/Medicare contributions because their reported gross income is reduced by the amount of transit andr parking fees. Employers save money on FICA, disability, unemployment and workman’s comp payroll expenses as well.