The Tax Cuts and Jobs Act, which was signed into law by the President last month, dismantles some popular employee benefit programs. Once such program is the tax break for employer-provided parking benefits.
In 2017, employees were able to deduct contributions of up to the following amounts for transit benefits:
- $255 per employee per month for transportation expenses
- $255 per employee per month for parking expenses
- $20 per employee per month for bicycle-related expenses.
The IRS announced in October that transportation and parking expense deduction would increase to $260 per month for 2018.
The new tax law eliminates the business deduction for qualified mass transit and parking benefits beginning in 2018, but retains the individual deductibility. Therefore, employers may continue to offer an employer-sponsored salary reduction program for employees to pay their own mass transit or parking expenses, but the employer will not be able to deduct the amounts as business expenses.
Starting in 2018, employers who subsidize employees’ transportation and parking expenses for the business expense deduction may consider revising their programs to allow employees to contribute their own dollars through pre-tax payroll contributions.
