Expect to see an increase in the commuter benefits limit in 2022
Do you need a good reason to use commuter benefits in 2022? How about having the ability to reduce your taxable income even more than before. Recently, the IRS released the pre-tax benefits amount for 2022. Employees who use commuter benefits can now spend up to $280 per month, tax-free. That’s up from $270 per month in 2021.
Commuter benefits can be used to pay for:
- Water Taxis
- Light Rails
- Parking, Meter, Garages, and Lots
No bicycle reimbursement in 2022
Unfortunately, the IRS did not restore the qualified bicycle commuting reimbursement, which was cut in the Tax Cuts and Jobs Act (TCJA) from 2018 through 2025. The bicycle benefit reimbursed employees up to $20 per month for bike spending.
There’s legislation in Washington that will hopefully restore some benefit for people who bike to work. Though some plans have failed, the Bicycle Commuter Act of 2021 has garnered a lot of attention. It would give bike commuters $81 per month in pre-tax benefits.
How commuter benefits work
If you are new to commuter benefits, here’s how it works. Employees can save money tax-free from their paychecks and be used to pay for employee commuting or parking costs. Each employee who enrolls gets vouchers or a debit card to pay the costs, or the transit or parking vendor is paid directly.
There can be significant savings for employers too. Employers save about $40 per month for each program participant. Their payroll tax bill is reduced as more employees save money tax-free. With 50 employees participating, an employer can save more than $24,000 annually.
Commuter benefits offer savings because the IRS considers it a “fringe” benefit. Any business in the United States can offer commuter benefits by following IRS guidelines.
Would you like to discuss adding commuter benefits to your company’s benefits? Book a meeting with us so we can help you find the best option for you.