New York City offers many job opportunities in the field of real estate that are coveted and highly sought after by job candidates. Successful candidates that land one of these jobs who live outside of New York City must now consider commuting into New York City. When planning this commute, one consideration should be the New York City Commuter Benefit Program.
The New York City Commuter Benefit Program (“Program”) is based on the provisions of Internal Revenue Code 132(f) which authorizes employees to use pre-tax dollars to pay for qualified transportation costs. The Internal Revenue Service has capped the amount of pre-tax dollars that can be utilized each month for both parking and transit at $245. The program limits partners to pre-tax dollar deductions of $21.00 per month for both transit and parking. Self- employed individuals are not eligible to enter into this program as the program is applicable only to employees.
The main provider for the City’s program is Wage Works. Wage Works recently acquired Transit Chek, a common transit plan provider utilized by many New York City employers. The two companies are now run under the same umbrella but Transit Chek is stationed in New York City and is the main service provider to New York City employers.
The Program has four main options which can be utilized by the employee: 1) The Commuter Card Plan, 2) Transit Pass Plan, 3) Access-A Ride, Paratransit Plan and 4) the Park-n-Ride Plan.
Commuter Card Plan:
Wage Works’ Commuter Card Plan requires employees to utilize commuter cards funded with pre- or post-tax dollars to purchase transit passes and tickets from transit providers throughout the New York State, Tri-state area. The card acts like a credit card and can be used at transit-provided, ticket vending machines, ticket windows and online/web stores. The commuter card is funded each quarter from payroll deductions in an amount selected by the employee. These payroll deductions are beneficial because they reduce individuals’ taxable wages and, thus, their tax obligations.
Employees can obtain commuter cards that are equal to the unlimited monthly transit ticket denominations (currently, $112), or an unrestricted card that can be funded based on the employee’s transit needs (which include purchasing daily, weekly or monthly transit passes/tickets). If an employee’s commuting cost is more than the applicable maximum limit ($245), he/she can choose to add post-tax dollars to the card to make up the difference. This can be done though payroll deductions or by adding personal funds to the card at the provider’s website. Any post-tax dollars used to fund the cards do not provide any additional tax benefit to the employee.
Transit Pass Plan:
Utilizing commuter cards to purchase transit tickets may cause an unwanted inconvenience for some employees. As such, the Transit Pass Plan allows an employee to arrange for home delivery of the transit provider passes by Wage Works. Under this plan, an account is created through Wage Works and funded each quarter with the employee’s pre- or post-tax payroll deductions. Wage Works then delivers the pass or ticket to the employee’s designated mailing address by the first of each calendar month. If the employee requires more funds to cover the commuting costs, a personal credit card can also be utilized.
Access-A-Ride, Paratransit Plan:
There is a large contingency of disabled employees in the New York City workforce. These individuals have alternative transportation needs which are provided through Access-A-Ride. Wage Works provide Access-A Ride Transit vouchers and/or coupons that can be utilized by these employees to purchase tickets within the Access-A-Ride transportation system. Similar to the other plans, pre- or post-tax dollars are set aside through payroll deductions to fund the transit vouchers/coupons. Participation in this program is limited to employees who are approved to participate in the MTA New York City Transit Access-A-Ride Paratransit Service program.
For several years now, the IRS has allowed for a $245 maximum payroll deduction for parking. In 2013, the transit amount was increased to match this amount. Separate accounts are maintained for both parking and transit (thus, an employee can take out the maximum $245 for transit and for parking). Pre-and post-tax dollars are used to fund these parking cards. Depending on the employer’s program, eligible parking expenditures include parking near a public transportation stop or station that is utilized by the employee to commute to work or parking near your office. Parking expenditures that are not directly related to your commute to work on public transportation are not eligible.
When parking at a parking garage facility that accepts credit cards, a Transit Parking card can be utilized to pay for parking. However, if the parking facility does not accept credit cards, there is a cash back program wherein an employee pays for parking out-of-pocket and then gets reimbursed by Wage Works. The employee must submit a monthly form which accounts for the parking expenses paid. Additionally, special parking discounts from 10% to 50% are offered to employees of the program at Central Parking garage facilities located throughout the City.
Biking to Work:
Wage Works offers a benefit for employees who bike to work. Employers must choose to provide their bike commuters with this fringe benefit. Employees can be reimbursed up to $20 per month for each month that the bicycle is regularly used for a substantial portion of travel between their place of residence and place of employment during the month. This benefit should be utilized more frequently given the City’s recent push for providing easier access to bicycles across the City.
What happens if the employee no longer works in the City?:
The IRS has stated that pre-tax money set aside for qualified transportation is not refundable. In that regard, Wage Works allows the employee 90 days after the employee’s separation date to spend the remaining funds on the commuter cards. After that time period, the card will no longer be activated.
New York City Commuter Program offers many options for tax savings for those who commute into New York City via transit, bus, Access-A-Ride or bicycle. Employees can save a significant amount of taxes by entering into these programs and having pre-tax dollars removed from earned wages. The maximum amount of earnings that can be deducted from employees per month is $490 ($245 each for parking and transit). If you have not done so already, contact your office’s Human Resources Department to learn more information regarding the programs available for New York City commuters.