Employer transportation benefits in the United States

An employer in the United States may provide transportation benefits to their employees that are tax free up to a certain limit. Under the U.S. Internal Revenue Code section 132(a), the qualified transportation benefits are one of the eight types of statutory employee benefits (also known as fringe benefits) that are excluded from gross income in calculating federal income tax. The qualified transportation benefits are transit passes, vanpooling, bicycling, and parking associated with these things.

Commuting expenses in general are not excluded from taxable compensation in US tax law (for example, the cost of fuel to drive to the regular work place cannot be deducted). The goal of making the specific benefits described above nontaxable is to encourage forms of commuting that reduce road congestion and pollution.

Tax-free commuter benefits, also known as qualified transportation fringes, are employer provided voluntary benefit programs that allow employees to reduce their monthly commuting expenses for transit, vanpooling, bicycling, and work-related parking costs. The benefit is a federal tax benefit authorized under the Internal Revenue Code Section 132(a), Qualified Transportation Fringes. Monies used for these eligible expenses are excludable from gross income subject to federal taxes. Many states also exclude these monies from state and local taxes.

Established in 1993 as part of the federal tax code section 132(f), commuter benefits were meant to provide tax incentives to employees to encourage their use of mass transportation, with the goal of reducing traffic congestion and improving air quality. The law provides for monthly caps on the amount that can be excluded from gross income and is therefore not taxed.

Eligible transit benefits include expenses the employer pays associated with employees using any public or privately operated transit service. One allowable form of transit benefit is providing employees with transit passes, including farecards, tokens, vouchers, or passes which entitle a person to the use of a transit service or to purchase a transit pass. The employer can also use cash reimbursement in certain circumstances where a voucher or similar instrument is not "readily available" as defined by statute. However, cash reimbursement must be supported by a "bona fide reimbursement system" which includes either receipts or a certification for the type of expense.

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