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News from King County Department of Transportation Pre-tax transit passes are like a ‘free’ raise
Federal law now allows employees to use pre-tax income to purchase monthly public transportation fare (for bus, train, ferry or registered vanpool). If a company chooses to offer this pre-tax commuter benefit to its employees, the company simply deducts the requested amount from employee income to purchase the fare in the form of a pass, ticketbook or voucher. These benefits are available to employees only through their employers, and companies of every size are eligible. There is no minimum level of employee participation. The “use-it-or-lose-it” provisions of medical pre-tax accounts are not an issue with commuter benefits because employee pre-tax income is spent monthly. The law allows employees to set aside up to $115 per month in pre-tax income for purchase of a transit pass or ticket book. Because pre-tax benefits lower an employee’s taxable income, the employee saves federal withholding and FICA payroll taxes on the amount deducted. The employer also saves paying FICA on the amount deducted. Employers can also choose to contribute to the cost of their employees’ public transportation fare and still allow employees to use pre-tax dollars for the employee share. Metro staff offers free training classes for employers – the next one is Jan. 24 in Seattle – tool kits to start the program at individual worksites, and assistance in carrying out the program. Go online for more information about all the programs Metro offers for employers.
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