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Ride It Off: How Commuting Impacts Your Taxes

written by Diane Hanson May 25th 2018

What could you do with and extra $1,500 a year?

Now that tax month is over, let’s focus on the positive side of the tax experience. Did you know that if you take transit to work, get to work by vanpool, or pay to park at work (or the train station), your expenses are eligible for a pre-tax deduction from your paycheck? Similarly to health insurance and dependent care reimbursement, your employer can deduct the cost of your rail pass/bus ticket/vanpool seat from your paycheck on a pre-tax basis.

Every morning, tens of thousands of commuters in Massachusetts make their green commutes even easier by signing up to receive monthly transit passes via mail, loading funds onto their commuter credit cards, or enjoying the reliability of confirmed vanpool seats. Now is a great time to start taking advantage of these benefits and savings by paying for your green commute with pre-tax dollars!

How does it work?

  • Your employer may already work with a company like WageWorks or Commuter Benefit Solutions to facilitate the distribution of passes and vouchers/credit cards for purchasing parking and/or passes. The MBTA Corporate Pass Program allows your company to purchase transit passes directly from the MBTA and distribute them at your worksite.
  • In most cases, you can sign up for these benefits any time of the year (not just at Open Enrollment). Your company benefits page or HR should have instructions on how to sign up.[1]
  • You select the type of pass you want each month or select a dollar amount you plan to spend on transit (it is usually loaded onto a special Credit Card used only for purchasing a transit pass). You can use this credit card at a kiosk or on the mTicket mobile app.
  • If you also spend money to park at a transit station, you can choose to have additional money withheld to pay for parking.

When I initially set up my commuter tax benefit, I received a credit card in the mail that automatically gets loaded each month to pay for parking at my rail station. I like that this benefit is flexible because it allows me to lower my deduction during months when I use less money for parking. Additionally, it is very convenient to receive my commuter rail pass in the mail by the 25th of each month.

How does this impact the paycheck?

Sally Commuter travels to Boston every weekday. She buys a Zone 4 Commuter Rail pass each month for $263 and sets aside an additional $90/month for parking:

  • $260 of her transit pass is eligible for pre-tax (Federal)
  • $135 of her transit pass is eligible for pre-tax (MA State)
  • All $90 of her parking is eligible for pre-tax deduction (Federal and MA State)
  • If Sally makes $60,000 a year, she can save over $1,500/year by paying for her transit and parking with pre-tax dollars.
  • Sally also logs her green commute at baystatecommute.com/massrides and earns points to spend on monthly raffles and discounts for meals, entertainment, and more!

Want to see the math?

taxes

So…who wants to cash in? Visit commute.com to learn about all your green commuting options, sign up for rewards and incentives through Bay State Commute, and check to see if your employer offers free commuter insurance through the MassRIDES Emergency Ride Home program.

Here are  two interesting transit articles I’ve read recently:

[1] Please keep in mind that not all options may be available to you depending on your employer, your commute, or the regional transit authority that serves your area. Please consult your tax advisor for any questions related to eligibility and deductibility.

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