Is Parking Included? Paying for Transportation Fringe Benefits

Employees have been given the option (if employers let them) to pay for qualified transportation fringes pre-tax since 1998. I.R.C. Section 132(f) provides the mechanism.  Employers have been able to contribute to the benefit since 1992. Qualified transportation fringes are intended to provide tax-advantaged dollars for employee commuting expenses like parking, mass-transit passes, van pools, sometimes even bicycles.  Pesky cafeteria plan rules don’t apply (allowing employees to make more-frequent changes in their elections).  The coronavirus pandemic, which resulted in many employees working from home, made one unfortunate provision apparent: no refunds allowed.

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• Fringe Benefit Rules (IRC § 132)
  Learn more about how section 132(f) operates.  The pre-tax benefit isn’t for all commuting expenses—like gas for a single passenger car. Outside of mass transit, commuting transportation provided to an employee must be in a vehicle that has seating capacity for six or more adult passengers and the van’s mileage for the year must reasonably be expected to be at least 80% attributable to employee commuter trips during which at least half the seats are used. Employers that provide van pools should make sure they comply.

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