One largely neglected provision of the massive spending bill passed by Congress is going to help employers lower travel costs for employees who use public transit to commute to work.
Under the new law, employers will be able to spend up $255 a month tax-free on either transit passes or parking for employees.
Throughout 2015, there was a great disparity between the tax exclusion for parking benefits and public transit assistance. The tax exclusion for parking was capped at $250 a month, compared to only $130 a month for public transportation spending.
The 2009 stimulus bill established a $245 limit for public transit benefits. It was later extended for a year but expired and thus fell to $130 a month in 2014.
The Society for Human Resource Management praised the equalization in a press release.
"Employers will now gain certainty related to the tax treatment of several employer-sponsored benefits," said Kathleen Coulombe, senior adviser for government relations at SHRM. "Additionally, the bill provides employers with predictability and flexibility when offering a comprehensive benefits package to their employees — a key component in retaining and recruiting a skilled workforce."
Public transit advocates, who argue that incentivizing workers to commute via bus and subway can help reduce congestion in cities, have also been strong voices for parity.
"This is a significant shift in policy that will promote greater usage of public transit," Michael Melaniphy, president of the American Public Transportation Association said. "The federal tax law is now fair and no longer favors driving and parking over public transportation."
Like most other benefits, commuter benefits allow employers to compensate workers in a way that lowers their payroll taxes. Since most employees were going to spend the money either way, it's a win-win from the perspective of workers and management.
When employers don't offer the subsidies as a supplementary benefit, employees can have transit-related spending deducted from their paycheck to lower their tax liability, similar to a health savings account.
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