Commuter benefits
Commuter benefits are employer-sponsored benefits that help employees pay for eligible commuting expenses, often using pre-tax dollars. This guide explains what commuter benefits are, how pre-tax commuter benefits work, and why they matter for both HR teams and employees, especially as commuting costs rise and return-to-office plans evolve.
Commuter benefits are employer-sponsored benefits that let employees pay for eligible commuting expenses with pre-tax dollars.
For HR teams, they’re a simple way to deliver real financial value without adding complexity or significant cost. For employees, commuter benefits can meaningfully reduce the out-of-pocket cost of getting to work, especially as transit, parking, and return-to-office expenses continue to rise.
These benefits are commonly used for public transit, parking, and other work-related transportation costs, and they can play an important role in supporting employee satisfaction, equity, and retention.
What are commuter benefits?
Commuter benefits are employer-sponsored benefits that help employees pay for eligible commuting expenses, such as transit and parking.
They’re considered an ancillary benefit and are commonly offered to support employees who commute to work, whether daily or a few times per week. Employers can choose how the benefit is structured, including whether it’s employee-paid, employer-subsidized, or both.
In simple terms:
- They help cover the cost of getting to work
- They’re often offered alongside core health and financial benefits
- They can be structured in different ways, depending on employer goals
What are pre-tax commuter benefits?
Pre-tax commuter benefits are a common way commuter benefits are offered. They allow employees to set aside part of their paycheck before federal income and payroll taxes to pay for eligible commuting expenses.
Because these contributions are excluded from taxable income, employees take home more of their pay, and employers reduce payroll tax liability.
Why this matters:
- Employees typically save 20–40% compared to paying out of pocket (depending on tax bracket)
- Employers may save on payroll taxes for every participating employee
How do commuter benefits work?
Commuter benefits generally follow a simple process:
- The employer offers a commuter benefits program
- Employees elect a monthly contribution amount
- Funds are deducted pre-tax from paychecks
- Employees use the funds for eligible commuting expenses
Most programs run on a monthly cycle and can be adjusted during open enrollment or qualifying life events.
What expenses are eligible for commuter benefits?
Under IRS Section 132(f), eligible commuter benefit expenses typically include:
Transit expenses
- Bus passes
- Subway and train fares
- Ferry transportation
- Vanpooling programs
Parking expenses
- Parking near the workplace
- Parking at or near transit stations
- Park-and-ride facilities
Important note: Personal vehicle expenses like gas or mileage are not eligible under current IRS rules.
Who can use commuter benefits?
Commuter benefits are available to:
- Full-time and part-time employees, depending on employer policy
- Employees who commute via eligible transit or parking options
Employers can choose whether to:
- Offer commuter benefits as employee-paid (pre-tax only)
- Subsidize part of the benefit
- Offer both options
Are commuter benefits required?
At the federal level, commuter benefits are optional. However, some cities and states require employers of a certain size to offer them.
Common examples include:
- New York City
- San Francisco
- Washington, D.C.
Employers should review local regulations to ensure compliance.
Why employers offer commuter benefits
Many employers offer commuter benefits because they:
- Improve employee satisfaction
- Support return-to-office and hybrid work
- Reduce payroll tax liability
- Provide a low-cost, high-value perk
For HR teams, commuter benefits are often one of the simplest tax-advantaged benefits to administer.
Key takeaways: commuter benefits at a glance
- Commuter benefits help employees pay for commuting costs with pre-tax dollars
- Pre-tax commuter benefits reduce taxable income and increase take-home pay
- Eligible expenses include transit passes and work-related parking
- Benefits are optional federally but may be required locally
- They’re a practical, cost-effective benefit for employers and employees alike
What are the best commuter benefits providers?
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