Tax Benefits for Employers & Employees *

The federal tax code allows employers to provide tax-free qualified transportation fringe benefits (Internal Revenue Code, Section 132(f)) also commonly referred to as “commuter benefits”. Under law, Oshkosh employers can directly pay the cost of transit passes or allow their employees to pay for this benefit using pre-tax income. This offers employees and employers federal tax advantages.

Options for Providing Benefits:

• Company covers full cost of the benefit. Employers provide employees up to $100 per month (in 2002) for transit expenses tax-free. Oshkosh’s monthly bus passes are much less than $100, so the pre-tax amount would be near our fare. The employer does not incur payroll taxes on this benefit amount, and the employee does not incur federal on this amount.
  
  
• Company offers a pre-tax benefit. Employees may have up to $100 per month (in 2002) taken out of their pre-tax salary for commuting on transit. Oshkosh’s monthly bus passes are much less than $100, so the pre-tax amount would be near our fare. Employees save federal income and payroll taxes. Many employers prefer this option because the employee pays the cost, and the employer does not pay payroll taxes on the amount reserved by employees.
  
  
• Employer and employee share costs. Under this option, the employer and employee each pay a share. The employer, for example, might offer $10 per month in transit benefits and allow the employee to reserve $15 per month of pre-tax salary.

How Tax Savings Work:

Both employers and employees can save taxes when implementing transit benefits

Employer-Paid Benefits
If the employer pays for the benefit, the value of the benefit is

• Tax free to the employee
• Not subject to payroll taxes

Employee Pre-Tax Deduction
If the employer does not pay for the fringe benefit, but allows employees to reserve pre-tax income for transit expenses

• The employer's payroll taxes are reduced, and
• The employee does not pay federal income or payroll taxes on the amount deducted.

Commuter Benefits Provide Tax Advantages, Not a Tax Credit

It is important to emphasize that commuter benefits have tax advantages because they are not subject to federal income and payroll taxes. The commuter benefits program is not a federal tax credit, and employers do not need to file any special tax forms to achieve the tax savings.

Commuter benefits programs are designed to be good for business.

Commuter benefits programs can save employers money on parking and taxes. They can also increase employee job satisfaction and help in attracting and retaining employees.

Commuter benefits programs are good for employees.

Employees can commute by transit at a lower cost than they would if they paid the fares themselves. Many employees find this means of commuting convenient; it also saves money on auto maintenance and allows employees to avoid the stress of driving.

* Source: Transit Cooperative Research Board, Report 87, Strategies for Increasing the Effectiveness of Commuter Benefits Programs

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The Oshkosh Transit System will work with employers that would like to offer this program to their employees that use transit. If you are interested in learning more about commuter value programs for your employees, please feel free to contact the Oshkosh Transit System at (920) 232-5340.