Commuting Tax Deduction: How to Save Money on Your Trip to Work
Your daily trip to work can be a drain on your paycheck, but commuting tax deduction could change that. Find out how to save money on your trip to work here.
According to the US Census Bureau, more than 85% of workers drive to work in the United States. With this in mind, a common question among employees is whether or not there is a commuting tax deduction.
But, saving money on your trip to work isn’t that straightforward. There are some instances where you can receive a refund and others not.
Let’s have a closer look…
Understanding Commuting Tax Deduction
Commuting is the action of getting to and from your house to your workplace. This can include everything from:
You can even commute to work on a bicycle. To make it clear, the time you spend traveling between your home and your workplace is not tax deductible. This isn’t a business expense.
In most cases, even if you use your car for business purposes, you can’t get money back. For example:
- Transporting work materials from your home to the office
- Using commuting time to have a phone meeting or answer emails
- Paying for parking in or near your workplace every day
While this is the case, make sure to check with a tax advisor if you believe your circumstances are unusual.
Saving Money With Commuter Benefits
While you can’t deduct commuting expenses from your taxes, there are other effective ways to save money.
Beginning January 1, 2021, the Internal Revenue Service (IRS) is increasing the monthly pre-tax limit for parking and transit to $270.
By enrolling in these types of programs, employees can contribute $270 pre-tax towards mass transit a month. They can also contribute another $270 towards non-UC parking costs, making it a whopping $540 a month in pre-tax benefits.
Equal Benefits for Employers and Employees
The best part is that the benefits above are for both employers and employees. A company can save up to 7.65% per employee on payroll taxes when employees cover their commuting expenses with pre-tax dollars.
Let’s have a look at an example:
Let’s say you’re an employer with 100 employees participating in the commuter benefits program. Your savings would look something like this:
- 100 participants spending $270 a month on commuting
- 100 participants X $270 is $27,000
- $26,500 X 7.65%
This means every month you’ll make tax savings of $2,065.50 adding up to annual savings of $24,786.
Aside from saving you money, commuter benefits programs allow employers to:
- Motivate and retain their employees
- Do their bit for the environment by promoting shared and public transportation
- Show they care that their employees have a good work-life balance
The best part is, these programs offer employees a variety of different options. Some of these include:
- Discounted metro cards
- Uber pool rides
- Using Lyft
These programs are applicable to a variety of other rideshare and public transport schemes.
Join a Commuter Benefits Program Today
In short, there is no commuting tax deduction available today. That said, ConnectYourCare (CYC) makes it easy for companies to offer commuter benefits programs to their employees.
By working with transportation providers and parking companies, we can help you build a better relationship with your employees and save you money in the long run.
To find out more, visit our pre-tax commuter and parking benefits today.