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Pretax Transit Benefit Parity

Legislation that would maintain tax benefits for commuters who use transit is pending in Congress. If the legislation is not passed, the allowable pretax transit and vanpool benefit will drop from its current $230 a month to $120.

The 2010 Tax Extension Package temporarily set the transit and vanpool benefit maximum to $230 a month, the same as the amount allowed for parking. Under previous federal law, employers could offer employees up to $230 a month in pretax parking benefits or $120 a month in pretax transit or vanpool benefits. The disparity created a financial incentive for employees to drive alone to and from work.

Rep. Jim McGovern (D-MA) and Sen. Charles Schumer (D-NY) have introduced legislation that would make permanent parity between the transit and parking benefits. Unless Congress acts, the transit and vanpool portion of the benefit will revert back to $120 a month on Dec. 31, 2011. Inaction to make parity permanent would be the equivalent of placing a tax on employers who provide this benefit and workers who utilize public transit and their employers.

More information about the legislation is available at commuterbenefitsworkforus.com