Pretax Commuter Incentives

New Jersey and the federal government both allow for identical benefits when it comes to paying for transit with pre-tax dollars.

Pre-tax transit monies deducted by employees from their salaries are not subject to federal income taxes, New Jersey state income taxes, Social Security taxes or Medicare taxes. If additional money, beyond that which is allowable, is needed to purchase the transit service, then that amount is taxable.

 

As of January 2018, the maximum pre-tax amount allowable is:

  • Up to $260 per month  deducted from salary to pay for mass transit costs including train, bus, ferry and vanpool expenses
  • Up to $260 per month deducted from salary to pay for parking at work or park and ride sites

Employees may combine pre-tax benefit with employer subsidies up to $260/month for each. Both transit and parking benefits may be combined (up to $520/month).

Please note that these amounts are subject to change and are frequently adjusted through federal legislation. As of the recent tax reform, private sector employers will no longer able to deduct the fringe benefit payments to employees as a business expense. Additionally, the Qualified Bicycle Commuting Benefit is no longer eligible as a tax free benefit for employees.

Employees will see the effect of the commuter tax benefit when they purchase their transit fares/services each month and on their yearly W2 form. On the W2, an employee's taxable income will be reduced by the total dollar amount that was used on transit. Employers will see the benefit when they pay their own taxes.

For additional information, click here.

For more information about the benefit contact Anne Vivino at (973) 267-7600 or send her an email here.