Tax Benefits

Federal Benefits

It’s called Commuter Choice because it gives employees an attractive alternative to driving to work alone – a real choice. Presently, an employer may give up to $115 a month, in eligible transportation costs tax-free to an employee. Participating employers lower their FICA and Federal income tax costs. The maximum tax-free benefit may increase each year based on increases in the cost of living. The Internal Revenue Service will announce any annual increase in the eligible tax-free amount. Commuter Choice may be used on public transit buses, trains, ferries and vanpools. 

Not every employer can afford to pay for the full transportation benefit so the Commuter Choice has built-in flexibility. Take a look at the options. 

State of Minnesota

Employers that purchase transit passes to resell or give to employees may be eligible for a 30% State Tax Credit.

To qualify:

1. The transit pass must be a pass, token, fare card, voucher or similar item entitling a person to transportation at regular or reduced prices. Stock No. 1010200 For C corporations, S corporations, partnerships, sole proprietors, fiduciaries and nonprofit organizations.
2. The transportation must be provided by either a: " Public or privately-owned mass transit facility; or " A person in the business of transporting people for compensation or hire. The vehicle must have seating capacity for at least six adults, not including the driver.
3. The passes must be used in Minnesota. The credit is equal to 30 percent of the difference between the price you pay for the passes and the price you charge employees. It is not refundable and can only be applied to your current tax liability. Enclose this schedule when you file your Minnesota return.

Click here for a link to the 2007 Employer Transit Pass Credit form (ETP).

Transit Benefits Guide

A comprehensive guide to setting up a pre-tax transit benefit program.