Section 132(a) of the IRS code allows employees to pay for their qualified commuting costs (up to specified limits) with pre-tax dollars. The program was created to encourage commuting in a way that reduces road congestion and improves air quality so qualified expenses include transit passes, vanpooling, bicycling expenses and work-related commuter parking, but excludes the cost of fuel to drive a personal car to work.
As a pre-tax benefit, the program provides employees with a savings on their federal payroll tax since the designated benefit amount is deducted from their gross income. If any employees reside in a state that recognizes pre-tax benefits, the savings will increase. Employers who provide this benefit save on payroll taxes since the employer does not include the designated benefit amount in the employee’s gross income.
Qualifications and restrictions of this program include:
Please feel free to speak to an MBA Advisor for more information and instructions for setting up a Section 132(a) plan.
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