Qualified Transportation Fringe Benefits under ARRA
Update October 21, 2015 — This page has been updated to reflect the fact that the Qualified Transportation Fringe Benefits changes under ARRA, which expired at the end of December 2013, were temporarily extended for one year through December 2014 by the Tax Increase Prevention Act of 2014.
Update May 31, 2013 — This page has been updated to reflect the fact that the Qualified Transportation Fringe Benefits changes under ARRA, which expired at the end of December 2011, were temporarily extended through December 2013 by the American Taxpayer Relief Act of 2012.
Update October 31, 2011 — This page has been updated to reflect the fact that the Qualified Transportation Fringe Benefits changes under ARRA which were to expire at the end of 2010, were extended through December 2011 by the Tax Relief and Job Creation Act of 2010.
Under the American Recovery and Reinvestment Act (ARRA), the monthly tax exclusion for employer-provided commuter highway vehicle transportation and transit pass benefits increased to $230, effective from March 2009 through December 2010. This temporary provision has been extended by subsequent legislation through December 2014.
In 2014, employees may exclude from income $250 per month in transit benefits and $250 per month in parking benefits –– up to a maximum of $500 per month. Employees may receive benefits for commuter transportation and transit passes and benefits for parking during the same month; they are not mutually exclusive.
These qualified transportation fringe benefits are excluded from an employee's gross income for income tax purposes and from an employee's wages for payroll tax purposes.
Previously, there were two separate monthly exclusion amounts, one for transit passes and commuter highway transportation — such as commuter vans — and a different one for qualified parking. The exclusion amount for qualified parking was set at a higher rate. ARRA made all the exclusion amounts equal and set them at the higher rate for qualified parking. ARRA provided the equal benefits through Dec. 31, 2010, and the Tax Relief and Job Creation Act of 2010 extended this provision through Dec. 31, 2011. The Taxpayer Relief Act of 2012 retroactively increased the transit benefit for 2012 and extended this provision through Dec. 31, 2013. The Tax Increase Prevention Act of 2014 retroactively increased the monthly transit benefit exclusion from $130 to $250 per participating employee for the period of Jan. 1, 2014, through Dec. 31, 2014.
IRS Notice 2015-02 provides guidance to employers regarding the retroactive application of the increased exclusion for 2014. More information is also available in Publication 15-B, Employer's Tax Guide to Fringe Benefits.