Smart Benefits Is Smart for Employers
Tax Advantages and the Law
Using Smart Benefits, employees can save nearly $1,800 in taxes annually. Employers can avoid payroll taxes on the amount of Smart Benefits provided as well as qualify for local incentives.
This chart/example reflects the savings for a roundtrip from Glenmont to downtown DC for employees who work a five-day week and park at the Glenmont Metrorail lot.
| Each Taxable Year | For-Profits, State, and Local Govt | ||
Employee | Transit Only | Parking Only | Transit & Park |
| Annual Benefit or Payroll Deduction | $3,600 | $1,250 | $4,850 |
| Federal Income Tax 22.00% | (790) | (280) | (1070) |
| FICA: Social Security 6.20% | (220) | (80) | (300) |
| FICA: Medicare 1.45% | (50) | (20) | (70) |
| State Income Tax 7.00% | (250) | (90) | (340) |
EMPLOYEE TAX SAVINGS | $(1,310) | $(470) | $(1,780) |
| Net Cost to Employee | $2,290 | $780 | $3,070 |
| Employer Smart Benefits Payroll Tax Reduction | Transit Only $300 / Month | Parking Only $104 / Month | Transit & Park $384 / Month |
| Annual Benefit or Payroll Deduction | $3,600 | $1,250 | $4,850 |
| FICA: Social Security Match 6.20% | (220) | (80) | (300) |
| FICA: Medicare Match 1.45% | (50) | (20) | (70) |
| Unemployment FUTA 0.60% | (20) | (10) | (30) |
| Unemployment SUTA 2.62% | (90) | (30) | (120) |
EMPLOYER PAYROLL TAX REDUCTION | $(380) | $(140) | $(520) |
Non-profit employers enjoy the same tax advantages as for-profits, plus non-profits no longer have to pay unrelated business income tax on the benefits thanks to the 12/20/19 passage of H.R. 1865 (pg. 715). In other words, non-profits actually save money for each commuter benefit dollar.
For each taxable year, employers can exclude the value of transportation benefits provided to an employee from the employee's wages up to the following limits:
- $340 per month for combined commuter highway vehicle transportation and transit passes [including Metro's Smart Trip cards].
- $340 per month for qualified parking.
Maryland employers may also qualify for additional tax savings under the Commuter Choice Maryland Benefits Program and Montgomery County's FareShare Program.
The Transportation (Commuting) Benefits section of IRS Publication 15-B describes the qualified transportation benefits that employers may offer under the Internal Revenue Code (26 U.S.C. Section 132(f)).
Qualified transportation benefits include providing a transit pass benefit. The definition of a transit pass includes smart cards like Metro's SmarTrip card as described in IRS Revenue Ruling 2014-32
Considering a Third-Party Administrator?
- Third-party administrators charge a fee for their services. Smart Benefits is fee-free.
- Smart Benefits is managed locally by transit benefit experts.
- Some TPAs offer debit cards that let you transfer tax-advantaged funds directly to a SmarTrip card. In that case, the funds for transit and parking are commingled. Consult your tax advisor before deciding.
Get Started
Ready to open a Smart Benefits employer account? Submit an application and an account representative will get in touch with you. Remember, Metro does not charge a fee to participate in Smart Benefits, so there's no risk to apply.
Smart Benefits Employer Application
Employees may participate only after their employer has enrolled in Smart Benefits.
Have questions? Send an email to our Smart Benefits account team or call us at 202-962-2784.