Transportation Allowance
Transportation Allowance
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Nanny: Transportation Allowances
Updated 12/2009
Under the American Recovery and Reinvestment Act of 2009, for March 2009 through December 31, 2010, the tax-free amount an employer may reimburse an employee monthly under a qualified transportation fringe benefit plan is $230. The amount was $120.00 in January-February 2009. The monthly limit for the qualified parking benefit is $230 in 2009 and 2010, up from $220 in 2008.
The Transportation Equity Act for the 21st Century (known as TEA-21) established and adopted by the U.S. Congress in 1999 allows employers to offer to their employees a pre-tax fringe benefit for qualified transportation. In January 2000, the IRS issued regulations under IRS Code Sec 132(f)(4) to administer this plan.
The monthly limit for the qualified parking benefit was $220 in January-February 2009, and then $230/month March 2009 - December 2010 as a result of changes made in the American Recovery and Reinvestment Act of 2009. The monthly limit for transit passes and commuter highway vehicles that are qualified transportation fringe benefits was $115.00 in 2008.
While the legislation clearly intends for the employer to provide the actual transit pass, not a cash advance for its purchase, cash reimbursement is allowed if the employer can demonstrate that they would incur a significant administrative expense if they pre-purchased and distributed the pass.
The provision of transit passes by employers to employees, subject to the monthly limits, is a pre-tax benefit. Everyone wins because taxes are reduced for employers as well as employees.
IRS Guidance: Transportation Fringe Benefits
