Press Releases

For Immediate Release

New Federal Law Gives Tax Break to Transit Commuters

CONTACT:

Reka Goode
510/464-7706

Catalina Alvarado
510.817.5783

OAKLAND, Calif., JULY 10, 1998...There is good news for public transit and vanpool commuters, plus their employers, in the $218 billion federal transportation bill passed by Congress in May. The new law allows workers to deduct up to $65 a month from their pre-tax salaries to pay for monthly transit passes or vanpool costs.

The provision means employees can save in taxes as much as 40 percent of the amount deducted from their paychecks for transit or vanpool expenses. The new law expands the current transit subsidy program, in which companies may pay all or part of their employees' transit/vanpool expenses as a tax-free benefit on top of existing wages.

The new law does not change the current program. Employers still may subsidize their employees' transit/vanpool costs and claim a business expense deduction. By allowing these costs to be deducted from pretax salaries, however, the new law offers tax benefits to workers who pay their own transit/vanpool expenses. An employer simply removes up to $65 a month from a worker's existing pretax salary and gives it back in the form of transit/vanpool passes that are not subject to federal, state or local taxes.

Since employees' salary deductions are exempt from payroll taxes, such as FICA, unemployment and other payroll driven costs, employers save these costs when their employees purchase transit/vanpool passes.

In the Bay Area, approximately 25,000 employees a month receive transit/vanpool subsidies from their employers through the Commuter Check program, which is sponsored by the Metropolitan Transportation Commission (MTC). Since MTC launched Commuter Check in 1991, more than 1,400 companies have participated in the program, and in 1998, alone, the value of Commuter Check subsidies is projected to total $8 million.

"We expect the new federal law to boost the sale of Commuter Checks considerably," said Robert Huang, MTC transit marketing manager. "The salary tax-saving will appeal both to employees and employers." To obtain information on Commuter Check, call TravInfo, the Bay Area's advanced traveler information system, at 817-1717 (no area code needed) and press option 3.

The new federal Transportation Equity Act for the 21st Century, dubbed TEA-21, was signed by President Clinton on June 9. The law allows pre-tax salary deductions for transit and vanpool costs to be retroactive to Jan. 1, 1998, and it will increase the tax-deductible benefit from $65 to $100 a month in 2002.

MTC is the transportation planning, coordinating and financing agency for the nine-county Bay Area.

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