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).

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.