Commuter benefits (Transit & Parking)
Explore commuter benefits to save on transportation costs with pre-tax contributions and tax advantages.
What are commuter benefits?
Commuter benefits are qualified transportation fringe benefits defined under Internal Revenue Code §132(f). They allow employers to help employees pay for work‑related commuting costs with pre‑tax dollars, lowering the employee’s taxable income and, when deducted from pay, reducing employer payroll taxes as well. See more on fringe benefits here: Fringe benefits: What they are and how to handle them.
Check supports two commuter benefit types:
Benefit type | Examples of eligible expenses |
transit | Subway, bus, commuter rail, ferry, streetcar, vanpool (seats ≥6) passes, fare cards, or vouchers used for travel between home and work |
parking | Parking at or near the workplace or at a park‑and‑ride/transit station used for the commute |
Monthly pre-tax limits
The IRS defines a monthly limit for commuter benefit contributions that are excluded from taxable wages. Contributions can be made above these limits each month, but they will become treated as taxable wages.
Year | transit pre-tax limit | parking pre-tax limit |
2024 | $315 / month | $315 / month |
2025 | $325 / month | $325 / month |
Tax treatment
In general, commuter benefit contributions up to the monthly pre-tax limit are excluded from taxable wages. However, some state and local nuances do exist.
Federal
Commuter benefits are excluded from taxable wages for all federal taxes (Federal Income Tax, Social Security, Medicare, and Federal Unemployment) up to the monthly limit.
State and Local
State | Tax treatment |
California | California treats all qualified transit and parking benefits as tax‑free, and the state statute does not impose the same $325 per month limit on exclusion as Federal. |
New Jersey | New Jersey treats employee contributions to qualified transit and parking benefits as taxable.
Employer contributions are excludable up to the same pre-tax limit as federal, annualized. |
Pennsylvania | Pennsylvania treats employee contributions to qualified transit and parking benefits as taxable.
Employer contributions are excludable with no limit. |
Setting up commuter benefits in Check
To create a commuter benefit in Check, create a new Benefit object, and set the type to either transit or parking.
Check’s automatically monitors the monthly contribution total and enforces the monthly pre-tax limit. If contributions to a commuter benefit exceeds the monthly pre-tax limit, Check will automatically treat contributions above the limit as taxable, and will begin calculating taxes on those contributions.
Frequently asked questions (FAQs)
For employers
- Do I need a formal plan document?
A Section 132(f) plan does not require a written document, but most legal advisors recommend keeping one for audit protection.
- Can I offer commuter benefits to remote employees?
Yes, if they travel to a co-working space or the office. However, purely remote workers with no regular commute generally aren’t eligible.
- Are there state or local mandates?
Jurisdictions like New York City, San Francisco, and Washington D.C. require certain employers to offer pre‑tax transit elections.
- Do unused balances ever expire?
No. Funds roll forward while the employee remains active. Excess balances should be forfeited or cashed out (post‑tax) when employment terminates.
For employees
- Can I change my election mid‑year?
Yes. Unlike most cafeteria benefits, you may increase, decrease, or stop contributions prospectively at least once per calendar month.
- Are rideshares like Uber or Lyft eligible?
Only if arranged as a qualifying vanpool (6+ passengers, 80% of mileage is commuting). Standard rideshare trips do not qualify.
- What happens when I leave the company?
You can use any remaining transit funds on eligible expenses incurred before your termination date. Unused commuter balances cannot be cashed out tax‑free.
Last updated on May 27, 2025