By Johnny Jackson
Environmentally conscious commuters, and their like-minded employers, may be eligible for tax breaks.
According to Lindsay Durfee of The Clean Air Campaign, commuters can share their costs, and save at the same time, simply by taking transit or participating in vanpools.
Under the Internal Revenue Service Qualified Transportation Fringe Benefits law, workers who commute using transit or vanpool can set aside up to $115 per month in pre-tax payroll deductions to pay for their commuting expenses.
On the employer side, those who give their workers up to $115 a month to commute via transit or vanpool could get a tax deduction and save that value in gross income.
Also, employers who allow employees to use pre-tax income to pay for transit or vanpool expenses can save on the amount of payroll tax the employers must pay - a savings of about 8 percent. The worker would be able to accept up to $115 a month tax free.
That is, an employee would pay no income tax on that amount, when he or she buys transit passes or vanpool seats. The employer, according to Durfee, also saves through reduced payroll taxes.
Paying transit and vanpool costs for employees is a tax-free benefit for employers that results in tax breaks to the employer. The employer can provide a $115 benefit for a net cost of about $76.
"[These] qualified transportation benefits can be provided directly by you or through a bona fide reimbursement arrangement," said Mark Green, IRS spokesman.
Green said cash reimbursements for transit passes qualify, only if a voucher or a similar item is not readily available for direct distribution by the employee.
"You can exclude qualified transportation fringe benefits from an employee's wages even if you provide them in place of pay," he said.
Each month, the employer could opt to pay $40 toward the cost of a transit pass or vanpool seat and allow an employee to deduct up to $75 to cover the rest of the cost.
Employers throughout the state have saved millions by taking advantage of the benefits, Durfee said. For more about the benefits, visit the Internal Revenue Service web site.
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