Easy Way to Reduce Commuting Costs

Many Chicago area employers are not aware that they can provide their employees who commute using public transportation with significant tax savings by adopting a Qualified Transportation Fringe Benefit Program (“QTFB Program”). A QTFB Program enables the employer to withhold pre-tax amounts from an employee’s paycheck that can be used to pay for the employee’s public transportation costs. It is a win-win for both the employer and the employee. The employee can save 35% or more on the employee’s transportation costs and the employer can save payroll taxes on the amounts withheld.

FOR EXAMPLE, assume the employee pays $200 per month for a METRA train ticket. If the employer is participating in a QTFB Program, the employee can pay for the train ticket using pre-tax dollars. If the employee is in a 22% federal income tax bracket, the federal, state and employment tax savings could be almost 35% of the costs of the train ticket. The employee will save about $70 each month and the employer will save about $15 each month in taxes as a result of the employer’s adoption of a QTFB Program.

Under the program, the employer completes a simple online enrollment form to provide Ventra (the fare system used by the CTA, METRA, and PACE) with funding information. The employer then withholds the costs of the transit fare from the employee’s paycheck and forwards the withheld amount to Ventra, which then debits the employee’s Ventra card or mobile phone app with the withheld amount.

There is a misconception that the new tax laws did away with QTFB Programs. That is incorrect. A QTFB Program is an easy, simple, hassle-free way for an employer to provide tax savings to its employees.

If you would like more information on this subject, please contact me at 847-241-1793 or doleary@lavellelaw.com.