How much tax savings?
In 2024, employees may set aside up to $315 monthly for eligible transportation costs necessary to get to work
and a separate $315 monthly for eligible parking expenses paid so that the employee may be at work. Note that
these amounts are contributed separately and held separately; transfers from parking to transportation or vice
versa are not allowed.
Total tax savings depends on the amount an employee sets aside via pre-tax salary deductions and the employees tax
bracket. For example:
| Income Tax Bracket |
Income Tax Savings |
FICA Tax Savings |
Annual Tax Savings |
| 22% |
$1,584.00 |
$550.80 |
$2,134.80 |
| 32% |
$2,304.00 |
$550.82 |
$2,854.82 |
| 37% |
$2,664.00 |
$550.82 |
$3,214.82 |
| Table assumes employee contributes the combined maximum monthly allowance of $600 ($300 parking and $300 transportation)for a yearly total of $7,200. FICA (Social Security and Medicare) tax rate is 7.65%. |
How Section 132 FSAs work
The Transit and Parking FSA is similar to those for medical expenses and dependent care.
Before the start of the plan year, employees elect to set aside a certain amount (via equal and periodic pre-tax salary deductions) to cover qualifying costs of commuting to work. As an employee incurs Section 132 commuting expenses throughout the plan year, a request form is submitted to the employer for reimbursement.
No risk of loss
Unlike other FSAs, a Section 132 transit and parking FSA has no use-it-or-lose-it provision. If the employee does not use the full amount before the end of the program year, the left over amount is carried forward to the next year.
Who is eligible to participate in a transit & parking FSA?
As a general rule, the Transit and Parking FSA fringe benefit can only be provided by employers to employees. Common law employees and officers of corporations are eligible; however, sole proprietors, partners, independent contractors, and two-percent shareholders of S corporations are not.
Discrimination testing
The law does not include non-discrimination requirements for the benefit.
Qualified parking expenses
Parking expenses that can be paid with pre-tax dollars in a Section 132 plan include the cost of:
- Parking a vehicle in a facility that is near the employee’s place of work, or
- Parking at a location from where the employee commutes to work (for example, the cost of parking in a lot at the train station so that the employee can continue their commute on the train).
Qualified transit expenses
Qualified amounts include costs of any pass, token, fare card, voucher, or other item that entitles the employee to use mass transit for the purpose of traveling to or from their place of work.
However, when a transit voucher program is readily available, Federal regulations prohibit the use of cash reimbursement as a way to provide transit benefits.
The mass transit can be a public system, or a private enterprise provided by a company/individual who is in the business of transporting people in a “commuter highway vehicle,”defined in part as:
- Having a seating capacity for six or more adults (not including the driver);
- At least 80% of the of the vehicles’ mileage is from transporting employees to and from their place of work; and,
- Carries at least three passengers (not counting the driver).
Commuter highway vehicles may be owned or leased by an employer to be used by employees or a third-party provider for transportation purposes. Employees can also own and operate commuter highway vehicles.
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