You may receive certain fringe benefits at work to compensate for commuting or parking costs, including direct reimbursements and transit passes.
According to the IRS, qualified transportation fringe benefits can be excluded from your taxable income up to certain limits. These benefits include transportation in a commuter vehicle, such as a van, between your home and the workplace, transit passes, parking, and reimbursements if you commute by bicycle.
The amount of fringe benefits for transportation in a commuter vehicle or transit passes that can be excluded from your taxable income is $125 per month. For qualified parking, the excludible amount is $240 per month. And for bicycle commuting, the excludible amount is $20 per month times the number of months you commute by bicycle during the year.
The IRS points out that in order for transportation in a commuter vehicle to be excludible, the vehicle must have capacity for at least six adults not including the driver, and at least 80% of the vehicle’s mileage must be for commuting and for trips in which employees occupy at least half the vehicle’s capacity.
Transit passes can be passes, tokens, fare-cards, or vouchers for using public or private mass transit, or in a commuter vehicle operated by a person in the transportation business.
Qualified parking includes parking at or near your employer’s place of business, or parking at or near a place where you take mass transit to work.
The IRS also points out that de minimis transportation benefits can be excluded from employees’ taxable income. De minimis benefits could include occasional transportation provided when you work overtime.
According to the IRS, transportation fringe benefits up to the applicable limits can be excluded even if they are provided in place of pay. But benefits for commuting by bicycle are an exception and cannot be excluded if they are provided in place of pay.
If you receive fringe benefits that are subject to taxation, because the benefit does not qualify for exclusion or is over the excludible amount, your employer should include the taxable amount in your W-2 statement in box 1 as wages. This would be reduced by any amount you as an employee pay for the benefits.
If you have to include any fringe benefits for transportation in your taxable income, you should keep in mind that commuting expenses are not deductible as itemized deductions for job-related expenses. If you have unreimbursed transportation expenses other than commuting, such as to go to other jobsites, or to visit customers, clients, or vendors, you may be able to claim a deduction for the expenses, depending on the circumstances.
Publication 15-B, Employers’ Tax Guide to Fringe Benefits, IRS
Publication 525, Taxable and Nontaxable Income, IRS