Benefits in Addition to Salary: Employers may provide up to $230 per month to employees who commute to work by transit or vanpool or $20 per month to employees who commute to work by bicycle.  The employer pays for the benefit and receives the equivalent deduction from business income taxes.  Employees receive the benefit completely free of payroll and income taxes, in addition to their current salary.  Employers can pay directly for vanpool expenses or purchase transit passes for employees.  Alternatively, they can reimburse employees if these passes are not available and the employee provides a receipt.

Benefits Instead of Salary: Employers may permit their employees to set aside up to $230 per month of their pre-tax income to pay for transit and vanpools.  Employees save on income taxes since that amount is no longer reported as taxable salary.  Employers are able to reduce their payroll costs.

Combination: Employers may share the cost of commuting with their employees.  Employers can give their employees part of the cost in addition to salary and allow their employees to set aside part of their pre-tax income to pay the remaining amount.  The employer can subsidize any amount, but only $230 per month is tax deductible.  Any amount over that is taxable.

Qualified Parking: Employers may offer employees the option of cashing out the value of employer provided parking.  Employee may receive up to $230 per month tax free for giving up their parking space.

For additional information click HERE to view IRS Publication 15 page 18, Transportation Commuting Benefits.