What are Transit Benefits?
Section 132(f) of federal tax law allows employees to pay for transit and parking costs using pre-tax dollars. By using pre-tax dollars, employees can save up to 40% annually on their commuting costs while also reducing your company’s payroll taxes. Congress adjusts these pre-taxes annually and for 2023, the monthly amount is $300 for transit and $300 for parking. Companies offering this program save money through lower federal and state employment taxes.
Who may participate? Is my company too large or small?
No organization is too large or too small. All types of employers, from single-person offices to large businesses with multiple locations, from any industry in the private, public and non-profit sectors, can participate in the program. It allows any size company to add to the benefits package without adding cost.
Can any employee participate in the program?
Yes. All employees are eligible for the transit benefit program. Self-employed persons, independent contractors, partners in a partnership and two-percent shareholders in an S-corporation are eligible for no more than $21 in deductions. Consult with the IRS (www.irs.gov) or your tax professional if you have any questions about eligibility.
Can I subsidize my employee's transit instead of doing pre-tax deductions?
Yes, there are some employers who subsidize 100% and others who do partial. It is up to your organization to decide.
For each participating employee, how much should I deduct before taxes?
A maximum of $300 per month for transit and $300 per month for parking. Ask each participant to confirm, based on their monthly commuting expense, the dollar amount you should withhold.
Are there fees for using the RTA Transit Benefit Fare Program?
Yes. There is a monthly participant fee per employee and there may be an additional administration fee based on your payment method. Since the RTA's role is to encourage the use of public transportation, our fees are consistently lower than other providers. When you are ready to offer the program we can discuss these with you.
Do I need to keep detailed records?
No complex record keeping is required. Like any other company expenditure, copies of order forms and canceled checks should be retained, but no special IRS reporting such as W-2 or 1099 statements is required. If an employer wants to report pre-tax deductions on W-2s, box 14 can be used.