Tax Benefits

How can Commuting Save You Even More Money?

Federal law gives employers ways to reduce the cost of commuting for employees by offering one or both of these allowances for public transportation or qualified parking:

  1. A tax-free employer-paid subsidy
  2. A pre-tax employee-paid payroll deduction

Tax-exempt and pre-tax limits are set by the IRS. The following are the limits for the 2024 tax year:

  • $315 per employee per month for vanpool, bus, ferry or rail
  • $315 per employee per month for qualified parking

The employee can set aside up to $315 of pre-tax income per month when he or she pays part or all of the cost of public transportation through a pre-tax payroll deduction. The employee saves federal withholding and FICA payroll taxes on the amount deducted, while the employer avoids paying FICA on the amount deducted.

Employees may also share the cost with employers using after tax income. Pre-tax payroll deductions are referenced in the Internal Revenue Code, Section 132(F), as amended by TEA-21, Title IX, Section 910.

Click here for the IRS Employer's Tax Guide to Fringe Benefits.

Company/Employer - Business & Occupation Tax Credit

What is the Business & Occupation Tax Credit?

Organizations that provide Commute Trip Reduction incentives to employees or tenants are eligible to receive the Business and Occupation (B&O) tax credit.

Qualified Commute Trip Reduction (CTR) incentives AKA commuter benefits include ride-sharing benefits like Vanpool and Vanshare, public transportation benefits, like ORCA Business Program, as well as ridesharing and active commute benefits like bike shares.

How it Can Help

The B&O Tax credit for CTR incentives is equal to 50% of the cost of the benefit being provided. Employers and property managers can receive up to $60 per employee or tenant per year. This cannot exceed a maximum of $100,000 a year allotted for this tax credit. The application coincides with the federal tax cycle on a first-come, first-served basis.

How to Apply

To apply organizations can create an account with the Washington State Department of Revenue.

Who is Eligible

Property Managers who provide CTR incentives to their tenants or businesses that provide CTR incentives to their employees.

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