Q: Tax Playa, are there any tax benefits for my commute to work?
Geoff, Arlington VA
A: As a general rule, commuting is considered a personal expense and is therefore not tax-deductible. However, there is a special provision in the tax code for your employer to provide parking and public transportation passes as an excluded fringe benefit...
For more information on the commuting fringe benefit, please consult IRS Publication 15B, Employer's Guide to Fringe Benefits.
There are two broad classifications of commuting benefits:
- De Minimis Transportation Benefits. Your employer can exclude the value of de minimis transportation benefits if their value is so low that accounting for them would be unreasonable;
- Qualified Transportation Benefits. These include an employer shuttle, public transit passes, and parking.
Breaking out the qualified transportation benefits:
- Employer Shuttle. It must seat at least six adults (not including the driver). It must be a commuter highway vehicle. It must have at least 80% of its mileage devoted to transporting workers between their homes and work with employees occupying at least one-half of the seats (not including the driver).
- Transit pass. This would include bus passes, monthly subway passes, farecards, etc. It can be for either mass transit or a commuter highway vehicle. This is limited to $115 per month in 2008.
- Parking. The only requirements here are that it must be on or near the business, and it cannot be at an employee's home. This is limited to $220 per month in 2008.
The qualified transportation benefits can be directly paid by the employer, reimbursed by the employer if a receipt is turned in, or provided as a payroll deduction option for employees (where it is both pre-income tax and pre-FICA tax).
This fringe benefit (like most) are not available to more than 2% owner-employees of Subchapter S corporations. It is also not available to sole proprietors and general partners (though they may be able to deduct some of these costs as an ordinary and necessary business expense provided they have a qualified home office).