Tax Advantages of Employer Contribution
Tax-free transit benefits provided as an employer contribution allows you to give your employees up to $230 per month in benefits to commute to work by transit or vanpool. You pay for the benefit and receive an equivalent deduction from your business income taxes. Employees receive the benefit completely free of all payroll and income taxes, in addition to their current compensation.
|
Assumptions:
|
Employee pays 25% in federal income tax
Employee pays 6% in state income tax Employer pays 30% in federal/state income tax |
If the employer provides $230 per month ($2,760 per year) in tax-free transit benefits, the value to the employee is the following:
|
Employee Value
|
Private
Employer (for profit) |
Non-Profit/Federal Employer
(FERS) |
Government
Employer (CSRS) |
|
Base amount
|
$2,760
|
$2,760
|
$2,760
|
|
Federal income tax (25%) saved
|
$690
|
$690
|
$690
|
|
Employee FICA (7.65%) saved*
|
$211.14
|
$211.14
|
$40.02
|
|
State income tax saved (6%)
|
$165.60
|
$165.60
|
$165.60
|
|
True value to employee
|
$3,826.74
|
$3,826.74
|
$3,655.62
|
* Civil service column uses only Medicare tax rate (1.45%), not full FICA rate.
The following is the cost to the employer:
|
Employer Costs
|
Private
Employer (for profit) |
Non-Profit/Federal Employer
(FERS) |
Government
Employer (CSRS) |
|
Base amount
|
$2,760
|
$2,760
|
$2,760
|
|
Employer FICA (7.65%) saved*
|
($211.14)
|
($211.14)
|
($40.02)
|
|
Employer unemployment tax (5.75%) saved
|
($171.12)
|
($171.12)
|
($171.12)
|
|
Less 30% fed/state tax deduction
|
($828)
|
$0
|
$0
|
|
Net cost to employer
|
$1,549.74
|
$2,377.74
|
$2,548.86
|
For more information, contact Arlington Transportation Partners (ATP) at 703.247.9299 (TDD: 711), solutions@transpartners.com, or request ATP's services by filling out this form.