Commuter benefits no longer qualify for a tax deduction under the Tax Cuts and Jobs Act. However, employees can still access commuter benefits by using their pre-tax dollars to pay for their commuting costs. The Act makes no changes to the exclusion from wages from employees.
If you’re considering offering commuter benefits to your employees or changing your existing program, here’s what you should know.
What Qualifies Under The Act?
Employees may elect pre-tax salary reductions for qualified parking and transit passes. The limit is $260 per month per employee for each. If an employee spends more than the threshold amount, the excess is a taxable benefit. The Act now eliminates the income exclusion for qualified bicycle commuting reimbursements.
If an employer allows an employee to pay for parking or transit with pre-tax salary reduction amounts, then those expenses will continue to be nontaxable for the employee. However, the employer can no longer deduct them as an expense.
Why Offer Commuter Benefits?
With the loss of employer deductible expenses, employers may wonder why they should bother to offer commuter benefits. It turns out many powerful reasons exist to move ahead when considering them for your business.
First, according to the International Foundation of Employee Benefit Plans’ Transportation Benefits and Incentives: 2017 Survey Results, attracting and retaining talented employees is the primary reason for considering transportation incentives.
Second, a growing number of cities and counties now mandate commuter benefits for employees. New York City, Washington, D.C., San Francisco, Berkeley, Richmond and nine counties in the San Francisco Bay Area have already implemented laws to encourage the use of mass transportation. Considering the push to lower our carbon footprint, other communities may follow suit.
Third, commuter benefits show your company cares about its’ employees. Encouraging the use of mass transportation and helping employees alleviate stress improves their well-being and can reduce health care claims.
Lastly, employers don’t have to take on the entire expense for commuter benefits. They can fund a portion of the benefit and the employer can pay the balance up to the maximum from their pre-tax income. This win-win situation satisfies employee wants and needs and minimizes employer expenses.
How Can You Start A Program?
Setting up commuter benefits for your company isn’t difficult. Charlotte Payroll can streamline the process and manage payroll and HR requirements.
We understand the Tax Cuts and Jobs Act, qualification demands, and tax and reporting requirements. We can help you create a simple, efficient program that serves your company and employees well.
What If We Want To Eliminate Commuter Benefits?
If you already offer commuter benefits and you’re considering doing away with them or changing what you offer, there’s much to consider. Eliminating a tax deductible perk probably won’t sit well with employees, but we can offer you alternatives.
Charlotte Payroll will do a cost/benefit analysis and suggest ways to adjust your benefits package and payroll to satisfy both you and your employees. We can also adjust your accounting practices to properly reflect the changes to the Act.
Charlotte Payroll offers a free consultation if you want to establish a commuter benefit program or modify your existing one. We can help your business stay competitive and minimize expenses for your business.