Qualified Transportation Fringe Benefits

Employers can help employees get to and from work in a tax-favored manner. Within certain monthly dollar limits, employer-provided qualified transportation fringe benefits are exempt from tax. The following fringe benefits are currently available.


Commuter Transportation - Transportation provided by or for an employer in a commuter highway vehicle (e.g., van pool vehicle) qualifies as an excludable transportation fringe benefit. A commuter highway vehicle is one in which (a) there is seating capacity for at least six adults (other than the driver) and (b) at least 80% of the mileage is reasonably expected to be for transporting employees between their residences and their place of work and for trips where at least half the adult seating capacity is occupied by employees.

Transit Passes - These include passes, tokens, vouchers, or similar items that entitle the employee to transportation. They must be for transportation (1) on mass transit facilities (whether or not publicly owned) or (2) provided by a person in the business of transporting people in a vehicle seating at least six adults other than the driver. There are no substantiation requirements for transit passes provided directly by the employer. Also, transit pass reimbursements qualify if a voucher or similar item exchangeable for a transit pass is not readily available.

Qualified Parking - This is parking provided on or near the employer’s business premises, or on or near a location from which the employee commutes to work by mass transit or hired commuter highway vehicle.

Bicycle Commuting Reimbursement - This includes any employer reimbursement of reasonable expenses incurred by the employee for the purchase, improvement, repair, and storage of a bicycle regularly used for commuting from the employee’s residence to the place of employment.

Employers can use compensation reduction arrangements for qualified transportation benefits. Under this arrangement, employees will not be taxed solely because they can choose between any qualified transportation fringe benefit and cash compensation. Only employees who choose cash instead of the benefit are taxed.


Please contact us to determine which of these provisions would benefit your business.