CARL WATTS & ASSOCIATES

August 11, 2014

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Employee Transportation
Benefits
Commuting has long become a big every work-day hustle for most Americans. Along with the ever increasing time spent on the roads, there are costs, the dreaded rush hours, and pollution.

If you’re wandering what this has to do with taxes, please go on reading. To make things clear from the start, this newsletter is not about travel expenses that you can deduct as employee or business expenses, nor is it about commuting in general (meaning any distance you have to travel between your home and your place of work) which is usually not tax deductible.
However, as an employee, your employer may be willing to offer you employee transportation benefits. If this is the case, this newsletter will summarize what you should know about commuting fringe benefits.

As you may know, some of the fringe benefits qualify for the exclusion rules, which means that they are exempt from withholding and payment of employment taxes, are not reported as taxable wages on the employee's Form W-2, and are not included in gross income.

There are two types of transportation or commuting benefits to which the exclusion rules apply:

  • De minimis transportation benefits.

  • Qualified transportation benefits.

A de minimis transportation benefit is any local transportation benefit you receive as an employee which has so little value (taking into account how frequently you are provided transportation) that accounting for it would be unreasonable or administratively impracticable. For example, it applies to occasional transportation fare you get because you are working overtime, so long as the benefit is reasonable and is not based on hours worked.


Qualified transportation benefits include:


  • A ride in a commuter highway vehicle between the employee's home and work place.
  • A transit pass.
  • Qualified parking.
  • Qualified bicycle commuting reimbursement.

A commuter highway vehicle is any highway vehicle that seats at least 6 adults (not including the driver). In addition, it is reasonably expected that at least 80% of the vehicle mileage will be for transporting employees between their homes and work place with employees occupying at least one-half the vehicle's seats (not including the driver's).

A transit pass is any pass, token, farecard, voucher, or similar item entitling a person to ride, free of charge or at a reduced rate, on one of the following:

  • On mass transit.
  • In a vehicle that seats at least 6 adults (not including the driver) if a person in the business of transporting persons for pay or hire operates it.

Mass transit may be publicly or privately operated and includes bus, rail, or ferry.
Qualified parking is parking provided to employees on or near the business premises. It includes parking on or near the location from which employees commute to work using mass transit, commuter highway vehicles, or carpools. It does not include parking at or near the employee's home.

If you prefer to ride your bike, for any calendar year, the exclusion for qualified bicycle commuting reimbursement includes any employer reimbursement during the 15-month period beginning with the first day of the calendar year for reasonable expenses incurred by the employee during the calendar year.

Reasonable expenses include:

  • The purchase of a bicycle, and
  • Bicycle improvements, repair, and storage.

These are considered reasonable expenses as long as the bicycle is regularly used for travel between your residence and the place of employment.


For this exclusion, you must be:

  • A current employee.
  • A leased employee who has provided services on a substantially full-time basis for at least a year if the services are performed under the employer primary direction or control.

The value of transportation benefits that you get during 2014 which can be excluded from your wages may be up to the following limits:

  • $130 per month for combined commuter highway vehicle transportation and transit passes.
  • $250 per month for qualified parking.
  • For a calendar year, $20 multiplied by the number of qualified bicycle commuting months during that year for qualified bicycle commuting reimbursement of expenses incurred during the year.

For any employee, a qualified bicycle commuting month is any month the employee:

  • Regularly uses the bicycle for a substantial portion of the travel between the employee's residence and place of employment and
  • Does not receive:

Transportation in a commuter highway vehicle,

Any transit pass, or

Qualified parking benefits.

If the value of a benefit for any month is more than its limit, the amount over the limit minus any amount the employee paid for the benefit is included in the employee’s wages. The excess from your wages as a de minimis transportation benefit cannot be excluded.

These are the IRS regulations regarding commuting benefits, and, with this, we wish you a pleasant commute.
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