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Different
categories of commuter ride-sharing groups qualify for vehicle
tax exemptions if they meet certain legal requirements.
Employers have four options:
-
Benefits
in addition to salary-- Employers may provide up to
$100 per month to employees who commute to work by transit
or vanpools. The employer pays for the benefit and receives
the equivalent deduction from business income taxes. Employees
receive the benefit completely free of all payroll and
income taxes, in addition to their current salary.
Benefits
Instead of Salary-- Employers may permit their employees
to set aside up to $100 per month of their pretax income
to pay for transit or vanpools.
- Combination--
Employers may share the cost of commuting with their employees.
Employers can
give their employees part of the share in addition to salary
and allow their employees to set aside part of their pre-tax
income to pay the remaining amount.
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- Parking
Cash Out-- Employers may offer employees the option
of cashing out the value of employer provided parking. Employees
forego the parking and either receive the taxable cash value
of the parking space, or a tax-free transit or vanpool benefit
of up to $100 per month.
- For a more complete explanation
of tax exemptions, refer to the Tax-free
Commuting Benefits
SEQL document.
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- Vanpools can be operated or sponsored by an employer, be contracted through an outside leasing company that independently charges a monthly fare for a group of co-workers, or can be operated and administered through a public transit provider.
- Vanpools typically require 9-14 participants and sometimes require two to three dedicated drivers.
- If available, use an existing vanpool coordinator that can match up people with similar origins and destinations.
- Similarly, utilize any existing centralized commuter registration programs that may exist in your region. These help you more easily identify potential carpool buddies.
Guaranteed rides home are
important. By offering a guaranteed ride home, employers
remove a major barrier to alternative commute methods--employee
fears of being "stranded" at work due to unforeseen
circumstances. This type of program provides employees
who commute via transit, carpool, or vanpool with transportation
home in the event of a personal emergency or unscheduled overtime.
Although some employers run their own programs, others participate
in programs administered by rideshare organizations,
transportation management associations, and transit agencies.
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Benefits to Employees:
-
Allows flexibility for occasional users of transit and vanpools
- Reduces personal income taxes
Benefits to Employer:
-
Enhances your benefits package at little to no cost
- Requires minimal paperwork
- Reduces payroll and business income taxes
Just So You Know...
-
Benefits in addition to salary are treated as a regular business expense similar to medical insurance premiums.
- Transportation benefits are excluded from cafeteria plans. IRC Section 125 covers cafeteria plans and flexible spending accounts. Section 132(f) covers transportation benefits.
- Section 132(f) benefits are exempt from anti-discriminatory requirements. The employer decides who receives the benefits.
- There is no "use it or lose it" rule. Any amount not used by the employee at the end of the year is returned to the employee the following year as taxable income.
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