Commuter Benefit Overview

Commuter Benefits 

Commuter Benefits allow employees to pay for qualified work-related transportation and parking expenses with pre-tax dollars. 

Commuter benefits can be used for any one or a combination of the following:

• Use of a commuter highway vehicle* between the employee's home and work place
• A transit pass
• Qualified parking 
• Approved commuter rides-sharing through services like Lyft and Uber 

*a commuter highway vehicle has a seating capacity of 6 adults plus a driver. This can be a private vehicle but must be used 80% of the time for work commuting purposes and on average be at minimum half capacity.

Eligibility

For companies that choose to offer commuter benefits, all full time employees and part-time employees working over 30 hours per week (10 hours per week in New Jersey) are eligible to take advantage of pre-tax commuter benefits.

The IRS also extends this benefit to paid owners and paid interns. However, unpaid owners are not eligible to take advantage of the pre-tax benefit.

Contribution limits

The IRS limits the pre-tax amount employees are able to contribute and use for commuter benefits on a monthly basis.

Employees can take advantage of both transit and parking benefits, each up to the pre-tax limit. Anything above the monthly limit will not be on a pre-tax basis.

For example, an employee can contribute and use up to $270 for transit and $270 for parking for a total of $540. However, if an employee wants to use $300 for transit only $270 would be pre-tax.

Are companies required to offer commuter benefits to employees?

Certain states and municipalities require that some employers must offer commuter benefits. We are going to break down those requirements and who they apply to.

NYC: NYC Transit Ordinance requires that employers, located in any of the five boroughs with 20 or more full time employees, offer commuter benefits for transit. Parking benefits are not required for NYC companies. To qualify, employees only have to work in NYC, they do not have to live in the city. For more specific information about NYC Commuter Benefits please visit their website here.

New Jersey: The New Jersey Commuter Benefit Ordinance went into effect on April 1st 2020. It requires all employers who have 20 or more employees, not covered by a collective bargaining agreement, offer commuter benefits. Tax exempt employers are excluded from this act. Employees do not have to live in New Jersey to be eligible for commuter benefits. For more specific information about New Jersey Commuter Benefits please visit their website here.

San Francisco: Bay Area Commuter Benefits Program requires all employers (for profit, non-profit & tax exempt) with 50 or more full time employees offer commuter benefits. For more specifics about the Bay Area program please visit their website here.

Richmond, CA: Richmond Commuter Benefits Ordinance requires all registered businesses in Richmond with 10 or more employees (averaging 10 or more hours per week) offer commuter benefits. For more information on the specifics of the Richmond Commuter Benefits Ordinance please visit their website here.

Berkeley, CA: Berkeley Municipal Code 9.88 requires that all employers with 10 or more employees (averaging 10 or more hours per week) offer commuter benefits. For more information on the specifics of Berkeley’s Municipal Code please visit their website here.

Seattle: Seattle Commuter Benefit Ordinance requires employers who have 20 or more employees to offer commuter benefits. Tax exempt employers are excluded. Employees do not have to live in Seattle to be eligible for commuter benefits. For more information on the specifics of Seattles Commuter Benefits please visit their website here.

Washington DC: Sustainable DC Omnibus Amendment Act requires employers with 20 or more employees to offer commuter benefits. For more information about options under the act please visit D.C’s page here.

While commuter benefits may not be required for your company they are a great retention and recruiting tool for employees. All employees have to commute to work and offering a commuter benefit program helps employees save tax dollars to cover those costs. 

Want to offer your employees commuter benefits? Login to Justworks and navigate to the Benefits section under HR on the left hand side. From there navigate to the add benefits tab and select commuter.