With gas prices on the rise, commuter benefits are becoming increasingly popular. Through employers, commuter benefits allow employees to use tax-free dollars on commuting expenses, saving employees money on annual taxes. Qualified expenses may include:
- Parking costs – parking on or near the business premises. It could also include parking on or near the location from which employees commute using mass transit, commuter highway vehicles, or carpools. Parking near or at an employee’s residence is not covered.
- Vanpooling – transportation between the place of employment and the employee’s residence. Transportation must occur in a commuter highway vehicle, seating at least seven adults (including the driver).
- Transit passes – passes, tokens, farecards, vouchers, or related items that permit employees to ride at a reduced rate or free of charge on mass transit vehicles. Similar to vanpooling, the vehicles must seat at least seven adults including the driver.
Tax Exclusion Limits
The current 2022 maximum contribution limit is $280 per month for qualified parking and $280 per month for combined transit passes and vanpooling. Election changes are not limited to the plan year. The amount an employee contributes to their commuter benefits account can be updated and adjusted each month or even terminated altogether. Funding will remain in the account until it is exhausted.
Commuter Benefits in Philadelphia
Pending final approval by Philadelphia’s mayor, new legislation will mandate employers with 50 or more full-time employees in Philadelphia to offer a commuter benefit program. Once signed, the legislation will take effect on December 31, 2022, allowing employees to use the benefits the following year.
These benefits can be implemented through pre-tax payroll deduction for mass transit (i.e., bus, subway, train, etc.) or bicycle expenses. Expenses for bicycle commuting include purchase, repair, maintenance, and storage costs. Additionally, employers will have the option to provide employer-paid public transit key cards for commuting expenses.
Affected Population
Employers with less than 50 workers physically located in Philadelphia will NOT be affected by the legislation. The bill will apply to employers who have at least 50 covered employees working in Philadelphia, even if they are not headquartered in the city.
Employees working for eligible employers must work an average of 30 or more hours per week for the same employer in Philadelphia over the past year to be considered eligible.
If you have any questions about your commuter benefits or the legislation regarding Philadelphia’s commuter benefits, please contact your dedicated Creative Benefits, Inc. team member.