Tax Benefits

Federal law now allows employers to offer their employees a tax-free benefit for commuting to work using public transit. This change to the tax code allows employees to purchase bus passes with pre-tax dollars, providing a financial incentive for using transit rather than driving alone. The pre-tax benefit is only available through the employer. There are three ways companies can provide this benefit.

Employee Pays through Pre-tax Dollars

Employers can deduct the cost of a bus pass from an employee's paycheck before taxes are applied to pay for the pass. The employee would not pay state and federal income tax, or payroll taxes on the benefit. This option is known as the "pre-tax" benefit.

Share the Cost

An employer can decide to share the cost of a bus pass with the employee. The employer would pay a portion of the cost and the employee would pay the remaining portion before taxes, giving both a tax savings.

Company Pays

The company pays for the entire cost of a bus pass in addition to an employee's current salary. The employee gets a free bus pass to commute to work and the employer can deduct the amount they pay from their taxable payroll. The cost of commuter benefits is also a tax-deductible business expense.

Steps to Implement Commuter Tax Benefits

Once your company has decided to make commuter tax benefits available to employees, there are some simple steps to get the program up and running.

1) Make arrangements with payroll and accounting

• Set up a separate accounting code for 132(f) transit benefit funds. These funds cannot be combined with other pre-tax benefits.
• Decide when deductions will be made from employee paychecks.
• Decide when employees can change their deductions or participation.
• For more detailed information regarding the tax implications of commuter benefits you may wish to consult a tax advisor.

2) Promote commuter tax benefits and sign up employees

• Have employees complete a payroll pre-tax deduction authorization form. The Sample Pre-Tax Deduction Form can be customized to meet your company's specific needs.

Your payroll administrator or provider deducts the pre-tax dollars for each participating
employee.

3) Purchase passes from Sun Tran

• Place pass orders by phone to (520) 206-8832 or email .
• Return invoice, payment and unused passes to Sun Tran within 60 days of receipt of passes.

4) Distribute the passes to employees

• Passes are sent to the employer via certified mail and will arrive mid-
  month prior to the valid period.
• If using a third-party payroll administrator, the passes may be mailed to the employees' homes.