The federal government passed sweeping tax changes at the end of 2017, that will affect your business this year and the transit benefit program. Employees are still able to take advantage of pre-tax transit benefits and businesses do not need to adjust their pre-tax or subsidized transportation benefits, as all are still IRS compliant.
Employee Transportation Benefits Unaffected
Whether your business allows employees to load their SmarTrip card on a pre-tax basis through their paycheck or you offer a direct subsidy up to the maximum allowed by the IRS (now up to $260/month), your business is compliant with the new tax laws. The benefits we all take advantage of on a monthly basis for Metrorail, buses, trains, and vanpools are thankfully intact and remain an outstanding incentive to utilize sustainable transportation options.
What’s a pre-tax transportation benefit?
If you do not currently offer this benefit and want to learn more about implementing transit benefits at your company on a pre-tax basis, please download our Commuter Benefits Guide.
Write-Offs and the Bike Benefit Eliminated
Business write-offs
Prior to 2018, businesses were able to write off subsidies provided for employee parking and employee transportation as a business expense. That write-off is no longer allowed after the recent tax bill went into effect on January 1, 2018.
Example: your company offers $100 per month to an employee over the course of 2018, via a transportation benefit such as SmartBenefits. Your business and the employee will not be taxed for that $100. However, your organization can no longer write off that $1,200 ($100 a month for a year) as an expense to reduce your overall taxes.
Bike benefit eliminated
Before 2018, businesses were able to offer employees up to $20 per month for biking related expenses. The employees who participated needed to bike to work regularly and also not receive any parking or transportation monthly benefits. Businesses were able to provide the money on a pre-tax basis; however, this benefit has been eliminated in 2018.
But wait, it’s not all bad. The bike benefit was removed but businesses are still more than welcome to offer a biking subsidy of their own design, albeit on a taxable basis. It also means that employees are no longer barred by the IRS from choosing between a bike benefit and a transportation benefit, it’s at the discretion of the business offering the subsidy.
Your business can continue to offer $20 per month (or more) to an employee, but the money will be taxed accordingly. Unlike the recent changes to the parking and transportation benefits, you will be able to write-off the money you offer for biking as a business expense.
Photo Credit: Reema Desai/ReemaDesai.com for Arlington Transportation Partners