Commuter benefits let employees set aside pre-tax dollars for eligible commuting expenses. These benefits reduce taxable income for employees and lower payroll taxes for employers. They are considered qualified transportation fringe benefits under IRS §132(f).
Eligible commuter benefits
Benefit Type | Eligible Expenses |
Transit | Subway, bus, commuter rail, ferry, streetcar, or vanpool (6+ passengers, 80% of mileage for commuting) |
Parking | Parking at or near the workplace, or at a park-and-ride/transit station used for commuting |
Contribution limits (2025)
Benefit Type | Monthly Pre-Tax Limit |
Transit | $325 |
Parking | $325 |
Contributions above the IRS monthly limits are allowed, but amounts over the limit are treated as taxable wages.
Tax treatment
Contributions within the monthly limit are excluded from federal income tax, Social Security, Medicare, and federal unemployment tax.
State and local treatment may differ:
California – All qualified transit and parking benefits are tax-free, with no monthly cap.
New Jersey – Employee contributions are taxable; employer contributions are excluded up to federal limits.
Pennsylvania – Employee contributions are taxable; employer contributions are excluded with no limit.
Common questions
Do I need a formal plan document? Not legally required, but recommended for audit purposes.
Can commuter benefits be used by remote employees? Yes, if they travel to a co-working space or office. Purely remote employees with no commute are not eligible.
Do balances expire? Funds roll forward while the employee is active. When employment ends, unused balances are forfeited or cashed out post-tax.
Can I change contributions mid-year? Yes. Elections can be increased, decreased, or stopped prospectively at least once per month.
Need help?
If you have questions or need assistance, please contact Salaris Payroll Support. We’re here to help.