METRO STAR EMPLOYER INCENTIVES & TAX BENEFITS

Category: Other

Offering transportation benefits to employees is an effective way to recruit and retain top talent-a critical strategy in today's difficult business environment-and gives you a tax break, too.  The 1998 amendment to the Transportation Equity Act for the 21st Century (TEA-21) created financial incentives related to commuter benefits for employers and employees.  Here's how it works. You can pick one incentive or employ a combination, up to a limit of $270 per employee per month.

• Employer-paid transportation benefits. Employers can pay for each employee to commute via mass transit (bus or vanpool). Employees do not pay taxes on the value of this benefit. This offers significant savings over providing the equivalent dollar value to employees in the form of a salary increase.

• Pre-tax transportation benefits. Employers can allow employees to elect to exchange taxable salary for a tax-free bus or vanpool benefit. Employers save money overall since the amount exchanged is not subject to payroll taxes. Employees save money because this reduces the amount of taxable income.

• Shared-cost transportation benefits. Employers can share the cost of bus or vanpool costs with employees and everyone can receive valuable tax savings. Employers can provide a portion of the cost of taking transit or vanpooling as a tax-free benefit and allow the employee to exchange taxable salary for a tax-free bus or vanpool benefit.

• Parking cash-out. Employers can offer employees the option to "cash out" of their existing parking space. In other words, the company can offer the employee what it would pay for the parking space in the form of taxable salary or tax-free transportation benefits.

Contact an attorney or accountant for specific tax guidance.