What are pre-tax Commuter Benefits?


As prices continue to rise at the pumps, employees may be considering ditching their personal vehicles and switching to public transportation to get to work. Some employers looking to offer more fringe benefits as a means to attract talent have implemented Commuter Benefits. These accounts are subject to separate monthly limits under the IRS of $280 per account, for a total of $560 per month if the employee elected both accounts to the maximum benefit. They are also subject to the same forfeiture rules as a Health Flexible Spending Account. But what can these accounts be used for?

All Aboard the Transit Account!

The first type of pre-tax commuter benefit is a Transit Flexible Spending Account often referred to as an FSA Transit Plan, Transit FSA, or TSA. Like any other flexible spending account, employees can elect an amount to be deducted from each paycheck before taxes to be used to cover transportation expenses related to work. These funds are then either pre-loaded into a debit card or are handled through reimbursement with receipts. This benefit is typically only available to employees and does not include their dependents.

Transportation expenses that are eligible:

  • Bus transportation fees
  • Mass transit vehicles and passes for:
    • buses
    • trains
    • subway
    • ferries
    • Vanpool (such as Express POOL, uberPOOL, or Lyft’s Shared Rides)
  • Passes, vouchers, or other similar means for commuting on mass transit
  • Vanpooling – the transportation between an employee’s home and work in a vehicle that seats at least six adults in addition to the driver and a minimum of 80% of the vehicle’s mileage is for commuting
The Early Bird Gets a Parking Spot
The second type of commuter benefit is a Parking FSA. This account is typically used in large metropolitan areas where parking is limited and very expensive.
Parking expenses that are eligible:
  • Parking expenses incurred at work
  • Parking expenses incurred at a location where you park to commute to work by mass transit
  • Vendor parking lots or garages
It’s also important to note what expenses aren’t eligible under commuter benefits:
  • Parking expenses at an employee’s home
  • Parking expenses that are not incurred near work (i.e., parking expenses incurred at an offsite meeting)
  • Carpooling
  • Gas
  • Toll Fees
  • Taxis
  • Limousines
  • Payments to a fellow participant in a carpool or to a friend who drives you to work
  • Traffic tickets
  • Regular Lyft and Uber rides that are not part of the carpool programs
If you have any questions or are interested in implementing Commuter Benefits for your employees, please don’t hesitate to reach out to Advanced Benefits and we’d be happy to assist!

Author: Arwyn Robinson – SHRM CP


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