Let’s face it…the details surrounding tax reform can be confusing. We have listened to the news, read the articles and followed the social media posts. The bottom line..there has been a lot of misinformation and confusion in the press surrounding the details of the pre-tax transportation benefit (IRS Section 132).
So let us take a quick moment to clarify some of biggest changes and how they will affect employers and their employees.
First and foremost, let’s just make this point clear. The pre-tax commuter benefit for transit and parking has not been eliminated. In fact, the changes in the new tax bill only affect employers who subsidize. The majority of the program has remained the same and will not be affected.
The biggest change affects the corporate tax filings for employers offering subsidies for transit and parking. While employers can no longer deduct subsidized transportation benefits from their corporate taxes under this new bill, they will still continue to receive payroll tax savings (7.65% payroll tax) for offering the benefit.
Here are some other key points and changes to consider:
- This has no impact on transportation benefits provided pre-tax. It only applies to subsidized amounts for transit, parking and other subsidized commuter transportation expenses.
- While the payroll savings will be available for the transit and parking portion of the benefit, companies that offer the bike benefit can no longer deduct this subsidy from their corporate taxes or take advantage of the payroll deduction benefit.
- The IRS announced that monthly caps for both parking and transit benefits will rise in 2018 to $260 per month.
The changes made to the tax code came into effect in 2018. Concerning the biking benefit, providers may opt to continue to offer biking products for companies that opt to offer the benefit regardless of the change in tax law.
If you are looking for a transit benefits provider or change the current one, we can help! Check out the advantages of joining Commuter Benefit Solutions.