Two Plan Options
1. Pre-Tax Salary Deduction: If you so choose, you can have money deducted from your paycheck before taxes are taken out. If used regularly, this can save you up to $500 a year on commuting costs. Here’s how it works. Under Section 123(f) of the Internal Revenue Code, benefit plans can allow for a tax-free contribution of up to $230 a month ($2,760 a year) for transit or parking. This plan reduces your gross salary by up to $330 a month, but your take-home pay is still only reduced by $200, which is a savings of up to $130 a month. These plans also save employers up to 8% in payroll taxes, since the payroll amounts are reduced across the board.
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2. Complete Coverage: The employer can also choose to pay for parking or transit completely. The company will then receive all tax benefits but employees will save thousands a year on commuting costs.
Take Advantage of Local Discounts
If you take public transportation, keep a log of these expenses and buy discounted monthly rider passes where available. For example, New York offers a reduced fare metro card that gives you unlimited rides for no more than $40.50 a month, available to those over 65 or with disabilities.
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