Save Money on Your Commute With This Often Overlooked Employee Tax Benefit

Whether it’s highway tolls or subway passes, your work commute can add up over time. To cut costs, your employer may offer commuter tax benefits.

Over at LearnVest, Certified Financial Planner™ Matt Shapiro says that even if your company doesn’t reimburse your transportation expenses, they might offer this common money-saving perk:

“If you pay for parking at work or you take public transportation to get to work, a lot of businesses will allow you to take that cost out of your paycheck pre-tax,” Shapiro says, adding that these costs (think metro passes or parking permits) are essentially work expenses. “It’s one of those things that people probably overlook when they’re signing up for their benefits on their second day at their job. If they don’t realize it until five years later, they’ve missed out on five years of a slight tax break.”

In short, commuter tax benefits don’t refund your transportation costs, but they let you avoid paying taxes on those costs. In other words, you use your pre-tax dollars to pay for your commuting costs.

According to the National Center for Transit research:

Most employees may receive up to $255/month for purchase of transit vouchers, commuter highway vehicle fares and/or parking fees from his or her employer. This subsidy value will not appear on their W-2 form as income...Employee pays for commute benefit with the pre-tax income up to the $255/month statutory limit and receives more after-tax spendable income...Employee may combine the pre-tax benefit with employer subsidies up to $255/month for each to pay for transit vouchers, commuter highway vehicle fares and/or parking fees

LearnVest suggests talking to your company’s HR department to see if this benefit is available. For more detail, check out the full post at the link below.