To help offset the high cost of commuting, many employers have implemented (or considered implementing) a qualified transportation plan as part of their employee benefit programs. A transportation benefit program typically includes items such as parking expenses, transit passes, vanpooling expenses, and more.
If you currently have a transportation benefit program in place or are considering setting one up, it’s certainly important to note that there a limit on the amount of transportation fringe benefit expenses that can be excluded from gross income. Below you will find information regarding the 2014 limits.
Limits Regarding Gross Income
Parking: No more than $250 per month for tax years beginning in 2014 in qualified parking expenses may be excluded from an employee’s gross income.
Transit Passes and Vanpooling Expenses: The monthly limit on the amount that may be excluded from an employee’s income is $130 for tax years beginning in 2014 for transit passes and vanpooling expenses combined.
During months when an employee exceeds the issued limit, and an employer is covering transportation costs that exceed the federal limits, the employer must include the overage amount in the employee’s gross income for the month.
Compensation Reduction Arrangements
When an employee is offered a choice between cash compensation and qualified transportation expenses, the amount of qualified transportation expenses is not included in gross income if, among other things, a written election is made under a Compensation Reduction Arrangement.
If your company has a sample Compensation Reduction Arrangement document in use, please make sure to update it for tax year 2014. For example, the CRA document for parking expenses would need to be changed to reflect the “$250 per month” limit.
I hope that you found this information helpful! At CBG Benefits, we welcome the opportunity to help your organization examine its fringe benefit plan design(s) and make recommendations for improvement.
Please contact us at 877-332-6387 to learn more.