Advertisement
Tax Breaks

Tax Benefits for Using Public Transportation

You can set aside more of your pay before taxes now to pay for mass transit.

My employer said that pretax benefits for public transportation just increased with passage of the fiscal cliff legislation, and that I could increase the amount of money I’m setting aside for commuting benefits. What are the new limits, and what do I need to do?

The law did increase the maximum amount you can set aside before taxes to use for mass transit, such as the subway, bus or train. In 2012, you could set aside $240 per month from your pay before taxes for parking but only $125 for public transportation. The new law boosted the mass transit benefit to be in line with the parking benefit, and both were also adjusted for inflation Now you can set aside $245 per month for public transportation, plus $245 per month for parking, for a total of $490 per month before taxes if you pay for both parking and public transportation to get to work. You generally set your contribution level for the year, but most employers let you make a change in any month -- for example, to suspend your contribution during a month when you’re on a business trip or vacation, or to adjust the allocation if you start driving less and taking mass transit more (or vice versa).

Advertisement - Article continues below

Because the limits were lower last fall, when you designated how much of your pay to set aside for transit benefits during open enrollment, you will probably need to fill out a new form to boost your contribution. (Some employers are asking all employees who use the transit benefits to fill out a new form, even if they aren’t increasing their contribution.) Contact your human resources department quickly so you can make changes in time for your next paycheck.

Besides increasing the contribution levels for mass transit for 2013, the new law also increased them retroactively for 2012. Employers are waiting for guidance from the IRS on how to handle the retroactive change, says Jody Dietel, chief compliance officer with WageWorks, which administers consumer-directed benefits.

For more information about pretax commuting benefits and a calculator to help estimate your potential tax savings, see WageWorks’ SaveSmartSpendHealthy.com.

Advertisement
Advertisement

Most Popular

8 Things You Must Know About Retiring to the Carolinas
retirement

8 Things You Must Know About Retiring to the Carolinas

From the mountains to the beaches, North Carolina and South Carolina offer retirees plenty of incentives.
August 14, 2020
What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much could it save you?
August 13, 2020
7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020

Recommended

Kamala Harris's Tax Policy Proposals
Politics

Kamala Harris's Tax Policy Proposals

Since she could be a heartbeat away from the presidency next year, you might want to know where Kamala Harris stands on taxes.
August 15, 2020
Stimulus Check Relief for Spouses of Deceased People is Coming
Coronavirus and Your Money

Stimulus Check Relief for Spouses of Deceased People is Coming

The IRS will be sending new stimulus checks to widows and widowers who didn't get their original payment.
August 15, 2020
Veterans with Children Get Second Chance for Extra $500 Stimulus Check
Coronavirus and Your Money

Veterans with Children Get Second Chance for Extra $500 Stimulus Check

The IRS set a new deadline for VA benefit recipients who didn't get an extra stimulus check payment for dependent children.
August 14, 2020
Social Security Recipients Get More Time to Request Extra $500 Stimulus Check
Coronavirus and Your Money

Social Security Recipients Get More Time to Request Extra $500 Stimulus Check

The IRS is reopening the registration period for seniors who didn't receive the additional payment for dependent children earlier this year.
August 14, 2020