Tax Advantages and the Law

2016 IRS limits for Qualified Transportation Fringe
"Qualified Transportation Fringe Benefit. For taxable years beginning in 2016, the monthly limitation under 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, is $255. The monthly limitation under 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, is $255".

Tax laws

  • Internal Revenue Bulletin: 2006-47
  • Rev. Rul. 2006-57 November 20, 2006
  • Qualified transportation fringes; smartcards and debit cards. This ruling provides guidance to employers on the use of smartcards and debit cards to provide transportation fringes under section 132(f) of the Code. Read More

Tax advantages

In June 1998, the Transportation Equity Act for the 21st Century (TEA 21) was signed into law. TEA 21 includes a provision amending the Internal Revenue Code (26 U.S.C. Section 132(f)). This amendment to the tax code allows employers to offer their employees public transportation benefits in addition to salary or wages, or allow the employee to elect to receive SmartBenefits® as a pre-tax payroll deduction, or some combination of the two.

1.132-9 Qualified Transportation Fringes. Questions and Answers.

Federal legislation prohibits cash or paycheck reimbursements when voucher programs are available.

Under federal tax laws, SmartBenefits® are available four ways. Many employers reap a 2-to-1 benefit. (Specific tax rules may vary according to state and type of enterprise.)

  • Direct employer-paid benefit: Give an employee a direct benefit of up to $255 maximum per month ($3,060 per year). It's tax-free to the employee, and if you're a private sector employer, you can probably write off the cost of providing SmartBenefits® as an ordinary expense.
  • Pre-tax salary deduction: By establishing a SmartBenefits® deduction program, employees can pay with pre-tax dollars through payroll deduction. The money withheld is completely exempt from state and local taxes. For each employee who receives the maximum of $3,060 per year, the savings is around $212 per year in FICA and unemployment insurance.
  • Combination: The employer provides part of the $255 benefit and allows employees the option to pay the balance from pre-tax income. The employer simply buys SmartBenefits® using the combined amount. Employees still save on payroll taxes
  • As an incentive: Offer it as part of a salary increase, bonus, award or incentive. No matter how you offer it, SmartBenefits® is a powerful tool for helping employers recruit, retain, and motivate employees.

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