While many of us don't like to think about it, we spend an awful lot of time getting to and from work every day. The average American spends roughly 50 minutes each day commuting, meaning that many of us spend more hours traveling to work during the year than we do taking vacation.
For many folks, the daily trip isn't cheap either. That's why pre-tax commuter benefits have become one of the top voluntary benefits offered by companies to their employees. These benefits allow workers to set aside money each month before taxes to pay for parking at work and other mass transit costs, such as fares for buses, trains, carpool vans, and ferries.
This year, employees were able to pay up to $230 tax-free each month for parking and mass transit costs, allowing those who contributed the maximum to each account to keep an additional $184 of their hard-earned money each month. However, this level of employee savings has only been made possible because in 2009 Congress acted to increase the mass transit contribution limit to give it the same weight as the parking limit. Prior to that 2009 amendment, employees could only contribute up to $120 per month for mass transit.
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Unfortunately, if Congress doesn't act before the end of the year, the current contribution level for mass transit will drop down to $125 per month, causing many who rely on this benefit to receive the equivalent of a tax hike on their commuting costs. That's a bite of up to $42 monthly in additional taxes.
To address this, Sen. Charles Schumer (D-N.Y.) and Rep. James McGovern (D-Mass.) introduced the Commuter Benefits Equity Act of 2011, which would permanently set parking and mass transit benefits at the same amount.
Passage of this legislation before the end of the year is important because it encourages individuals to ride mass transits and helps them to improve the environment, reduce congestion, and save money on gas. And importantly, it stops the tax code from favoring one group of commuters more than another.
For those who want to support this legislation, the website www.commuterbenefitsworkforus.com [of which my company, WageWorks, Inc., is a member] provides more information about the issue and gives individuals an easy way to contact their members of Congress to ask them to extend the limit for pre-tax mass transit contributions.
For other legislation or compliance-related questions, please send me an email at [email protected].
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