New Year Brings Tax Parity for Transit and Vanpool Commuters

A bigger tax break for Tampa Bay transit riders and vanpool commuters is now in effect after a deal reached by Congress and signed into law by the President in December brings parity between those who drive and those that use transit or ride in a vanpool to get to work.

Starting Jan. 1, the monthly fringe benefit cap on transit, vanpool, and parking increased to $255/month. For the past year, the benefit for transit users and vanpoolers was limited to a $130/month maximum; a result of an expired one-year extension to the $245/month benefit offered under the American Taxpayer Relief Act (ATRA) of the 2009 economic stimulus package.

By comparison, the benefit offered to drivers for parking fees has held steady at $250/month, being a permanent part of the tax code. Mass-transit advocates, such as the Association for Commuter Transportation (ACT), have been lobbying for permanent commuter benefit parity in the Internal Revenue Code for nearly two decades.

Transportation fringe benefits are provided through the IRS Tax Code Section 132(f), which allows employers to pay for (subsidize) commuting expenses related to transit, vanpool, parking, and biking, or for employees to set aside part of their income on a pre-tax deduction basis to cover transportation costs. Employers and employees can also share the cost, with the employer providing a pre-determined subsidy and the employee electing a pre-tax deduction up to the monthly maximum.

The program is mutually beneficial to both employers and employees, as allowing workers to reserve income on a pre-tax basis also saves employers on their payroll taxes.

In addition, the parity will be retroactive for the previous year, which means that employees that chose to withhold above the maximum and purchased fare media with taxable dollars will be able to apply the difference up to $250/month on their 2015 tax returns.