Not a Member?  Become One Today!

 
Pretax Limit on Transit Benefits Drops for 2014
Disparity grows between allowable transit and parking benefits

By Stephen Miller, CEBS  12/30/2013

updated 9/19/2014

The maximum allowed pretax mass-transit benefit for employees fell from $245 per month in 2013 to $130 in 2014, beginning Jan. 1.

Employees can deduct commuting costs from their paychecks, tax free, through an employer benefit program up to the allowable monthly limit. Similarly, organizations that subsidize their employees' commuting costs may do so up to the allowable limit, which results in lower payroll taxes than if they paid the money in wages.

A year earlier the American Taxpayer Relief Act temporarily raised the transit-benefit statutory limit to $245 per month. This new amount was not permanent and expired at the end of 2013.

By contrast, the monthly pretax parking benefit that employers can provide to drivers rose from $245 to $250 on Jan. 1, 2014.

"For employees who rely on or choose mass transit for their commutes, the decrease in the cap from $245 to $130 per month is the largest disparity we have ever seen between the transit and parking components of the pretax commuter benefit," Natasha Rankin, executive director of the Employers Council on Flexible Compensation, told SHRM Online. "Our long-term goal is to encourage that any tax legislation establishes permanent parity between the parking and transit portions of the commuter benefit." 

"It's a shame congress didn't act on this before year end given the bipartisan support commuter benefits have received in recent years," added Dan Neuburger, president of WageWorks Commuter Services, a benefits administrator. "Millions of middle class Americans and their employers will see a tax increase in January. People need to tell their congressional representatives that this must be addressed in early 2014 as it is difficult to administer this benefit retroactively." 

Mass-Transit and Parking Benefits:
Pretax Dollar Limits

 

2013

2014

Mass-transit (commuter) benefits

$245

$130

Parking benefits

$245

$250

Source: Internal Revenue Service


"If an employee had been getting the full cost of his or her transit expenses paid for by the employer up to the old $245 cap, and if the employer decides to decrease the maximum benefit to the tax-free maximum of $130, then it could mean a lot of money out of a worker’s pocket," noted Stephen Crim, research director at Mobility Lab, a research-and-development initiative of Arlington County Commuter Services in Virginia.

"Of course, employers could elect to keep paying the full cost of an employee’s transit costs, even without the payroll-tax benefit," Crim added.

Special Per Diem Rates for Travel Begin in October 2014

IRS Notice 2014-57 provides the 2014-2015 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home, specifically (1) the special transportation industry meal and incidental expenses (M&IE) rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method.

Beginning Oct. 1, 2014, the high-low per diem rates that can be used for lodging, meals and incidental expenses will increase to $259 for travel to high-cost locations and $172 for travel to other locations. The high-low M&IE rates will remain at $65 for travel to high-cost locations and $52 for travel to other locations.

The notice was issued on Sept. 19, 2014.


Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related SHRM Articles:


Related External Articles:
 


Related External Resource:


Quick Links:
 

 

Compensation & Benefits e-Newsletter:
To subscribe to SHRM's weekly Compensation & Benefits
e-newsletter,  click below.
Sign Up Now

 

Copyright Image Obtain reuse/copying permission