2016 IRS Commuter Benefit Update

Written by benefitexpress | December 23, 2015

On 12/18/15 the President signed the Consolidated Appropriations Act, 2016 into law. Included in this is a provision that establishes parity between the parking and transit portion of the commuter tax benefit. Separate pre-tax limits were imposed on commuter transit versus parking benefits. Effective retroactively to 1/1/2015, these limits will be the same.

  • 2015 pre-tax limit for either parking or mass transit reimbursement accounts is $250.00 per month.
  • 2016 pre-tax limit for either parking or mass transit reimbursement accounts is $255.00 per month.

How Does the Retroactive Increase Work?

This provision will only help those who:

  • Contributed after-tax to a mass transit reimbursement program in 2015. The monthly contribution amount up to $250.00 per month (instead of $130 per month) needs to be treated as pre-tax.
  • Amounts above $250.00 per month remain after-tax benefits.

What Should Employers Do If They Have Withheld Above the Cap?

We advise employers to speak with their payroll, accounting, and tax professionals. We expect the IRS to develop an administrative procedure that will clarify how employers are to account for the increase in excludable benefits for 2015.

Are You a Visual Learner?

No problem! We've got you covered. View our 'What Are Transit Benefits?' infographic.

Topics: Legislative Update, For Employers