What are the contribution limits for commuter benefits?

In 2019, the IRS mandated limit for pre-tax contributions to commuter benefits accounts will be increasing:

  • To $265 per month in transit expenses ($260 in 2018).
  • To $265  per month for parking expenses ($260 in 2018).

Keep in mind, the pre-tax contribution limit applies to the combined total of both employer and employee contributions. Contributions over $265  a month for transit or $265  a month for parking are loaded onto the card as post-tax contributions.

NOTE: Under the Tax Cuts and Jobs Act, signed into law on December 22, 2017, employers will no longer receive a federal tax deduction for providing mass transit, commuter highway vehicle, or parking benefits to employees, except as required for ensuring the safety of an employee. Employees, however, may continue using their own pretax income for commuter benefits.

  • Post-tax deductions for contributions over the limits are listed on paychecks.
  • Both post- and pre-tax funds can be used for a single transaction.

Example 1:

An employee contributes $200 for qualified parking and $100 for transit expenses a month. This is below the monthly pre-tax limit set by the IRS, and the funds are not included in the employee's wages as taxable income.

  • In February, the employee used only $100 of their parking funds and $50 of their transit funds.
  • In March, the employee had parking and transit expenses of $500.

In this case, the employee can spend up to $265  for transportation and/or $265  for parking for March.

  • Transactions made after these totals are spent would be declined.
  • The remaining amount must be paid out-of-pocket, even though there were leftover funds from the previous month.

Example 2:

An employee contributes $300 for parking and $300 for transit expenses a month. This is above the monthly pre-tax limit set by the IRS, and the funds in excess of that amount are included in the employee's wages as taxable income.

  • In February, the employee used only $100 of their funds for parking and transit.
  • In March, the employee had parking and transit expenses of $500.

The employee would be allowed to spend up to $265  for transit and/or $265  for parking for March, and transactions that exceed the IRS pre-tax limits would use any post-tax funds remaining on the card.

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