Unless they live close enough to walk to work, employees need a means to get to the office. And between train tickets, parking permits and tolls, the cost of commuting can quickly become overwhelming.
When President Clinton signed the Federal Transportation Equity Act for the 21st Century (TEA-21) less than a year ago, commuting became a lot cheaper for both employees and employers. All across the U.S. — from Portland, Ore., to Boston, Mass. — there are transit voucher programs such as TransitCenter, which is based in the New York metro area. Vouchers obtained from these programs are region-specific and can be used for travel on any approved method of transportation, whether it be train, bus or subway. For example, in the New York metro area, TransitCheks can be used in conjunction with the MTA, PATH and NJ Transit systems. Through programs such as TransitChek, a division of TransitCenter, employers can institute one of two systems that reduce the cost of commuting for their employees and gives both parties a tax break at the same time.
The TransitChek program offers employers two ways to do this, the first of which is to take a pre-tax deduction from the commuting employee’s salary. Workers can set aside $65 a month ($780 a year) of their pre-tax salaries to help pay their commuting costs. This saves them over $200 in taxes every year. And employers are exempt from payroll-related taxes on the amount their employees set aside under the program.
The alternative is for employers to supplement their employees’ salaries by giving them an additional $780 annually as a fringe benefit. The IRS considers this raise to be tax-deductible and exempt from payroll taxes and other costs. Through this program, a company can save an average of $364 in taxes per year for every participating employee.
Regardless of the plan you use, subsidizing your employees’ commutes will result in savings for everyone involved. And not only that, the more widespread use of mass transit systems reduces traffic and accidents on the road. Your employees’ health (and peace of mind) will benefit.
For more information about the TransitCenter in your area, call 1-800-622-5000.
For more information about the rules and restriction of this program, refer to section 132(f) of the Internal Revenue Code as amended on June 9, 1998, by Title IX, Section 910, of the Transportation Equity Act for the 21st Century, Public Law 105-178.
