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Qualified Parking Fringe Benefit

Issue Title: 

Qualified Parking Fringe Benefit


The fair market value that exceeds the qualified parking fringe benefit exclusion amount is wages and subject to FITW, FICA and FUTA.

IRC Section and Treasury Regulation:

IRC Section 132(f)(5)(C)

Treas. Reg. Section 1.132-9(b)

IRC Section 61(a)(1)


IRC Section 132(f)(5)(C)

Treas. Reg. Section 1.132-9(b)

IRC Section 61(a)(1)

Treas. Reg. Section 1.61-21(b)(2)


IRC Section132(f)(1)(C) allows an employer to provide “qualified parking” to employees.  The amount of the qualified parking benefit which may be excluded from gross income and wages shall not exceed the amount prescribed by the Service for that taxable year.  IRC Sections 132(f)(2) and 132(f)(6). The taxable portion  is the amount of the FMV of the qualified parking that exceeds the exclusion amount. This would be subject to FITW, FICA and FUTA. See Treas. Reg. Section 1.132-9(b) Q/A-8 and 22.

For tax years 2015 and 2016, an employee can exclude up to $250 and $255, respectively, per month in employer-provided parking as a qualified transportation fringe benefit.  See Rev. Proc. 2014-61, Section 3.17, 2014-47 IRB 860, for the 2015 limit and Rev. Proc. 2015-53, Section 3.17 2015-44 IRB 615 for the 2016 limit. For example, if the FMV of the qualified parking in 2016 was $500 per month, the taxable portion of the benefit would be $245 per month.

Qualified parking is parking provided to employees on or near the business work premises, or parking on or near a location from which employees commute to work by commuter highway vehicle mass transit, or van pool.  IRC Section 132(f)(5)(C) and Treas. Reg. Section 1.132-9(b), Q&A 4(a). Qualified parking provided by an employer includes parking that the employer pays for, either directly to a parking lot operator or by reimbursement to the employee, or provides on premises it owns or leases. See Treas. Reg. Section 1.132-9(b), Q&A 4(d).

The value of employer-provided parking is determined based on the amount an individual would have to pay for the parking in an arm's-length transaction; the existence of the employment relationship is disregarded, as is any subjective valuation of the benefit by the employee. See Treas. Reg. Section 1.132-9(b), Q&A 20; Treas. Reg. Section 1.61-21(b)(2).

When employer-provided parking is provided in conjunction with membership in a van or car pool, the individual to whom the parking space is assigned is considered the “prime member” responsible for the tax consequences of the parking. The statutory limit amounts of each car pool member may not be combined. If the parking space is not assigned to one van or car pool member, the employer must designate one of the members as the prime member. See Treas. Reg. Section 1.132-9(b), Q&A 21(f). The employer of the prime member is responsible for including the value in excess of the statutory limit in the prime member’s wages for income and employment tax consequences. See Treas. Reg. Section 1.132-9(b), Q&A 21(f)

Issue Indicators/Audit Tips:

  • Determine whether the taxpayer provides employer-provided parking for any of their employees.
  • Request a listing of employees entitled to receive employer-provided parking.
  • Determine if the employer includes any taxable portion of the benefit in employees’ wages.
  • Request the method used to determine the FMV of the parking benefit.
  • If the FMV was not determined by Treas. Reg. Section 1.61-21(b)(2), conduct a survey of facilities surrounding their place of employment to determine the FMV.