Building Your Business Business Taxes Employee Commuter Benefits and Your Business Taxes By Jean Murray Jean Murray Facebook Twitter Jean Murray, MBA, Ph.D., is an experienced business writer and teacher who has been writing for The Balance on U.S. business law and taxes since 2008. She has taught accounting, business law, and business finance at business and professional schools for over 35 years, has authored several books on saving money and simplifying your business, and was the owner of startup-focused company Emence Enterprises, LLC. learn about our editorial policies Updated on September 19, 2022 Fact checked by J.R. Duren Fact checked by J.R. Duren J.R. is a terms editor at The Balance, a role in which he focuses on providing clear answers to common questions about personal finance and small business. J.R. has more than 10 years of experience reporting, writing, and editing. As an editor for The Balance, he has fact-checked, edited, and assigned hundreds of articles. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article Commuting Is Usually Non-Deductible No Deduction for Employer Commuting Taxable Commuting Benefits Frequently Asked Questions (FAQs) Photo: Justin Case/Getty Images More and more employers are providing some kind of commuting benefits for employees. From bicycle or electric scooter commuting to parking and transit passes, new possible employee benefits are appearing every day. Are these employee benefits deductible to you as an employer? And are they taxable to the employees? Key Takeaways Typically, commuting expenses are not deductible for employees and employers. One exception is qualified bicycle reimbursements.You can offer up to $21 in de minimis benefits without including them in an employee's wages. Employers can pay employees up to $280 in certain qualified transportation benefits before the benefit becomes taxable. Commuting Expenses are Typically Non-Deductible Let's start with the basics: The cost of commuting back and forth between home and work is not deductible, whether you are an employee or the owner of a business. What this article looks at are exceptions to this IRS restriction, for two purposes: To allow businesses to deduct the cost of reimbursing employees for these costs as an employee benefit To allow employers not to include these reimbursements as taxable income to employees. This is usually an exclusion from income tax withholding and FICA taxes, but also affects the employer's unemployment tax liability No Deductions for Employer Commuting Expenses The 2017 Tax Cuts and Jobs Act eliminated business tax deductions for employers that give mass transit and parking benefits to employees, beginning in 2018 and going forward. This means you can't deduct any expenses for commuting, described as payment or reimbursement for travel between your employee's home and your work location unless these payments are "necessary for ensuring the safety of your employee." There is one exception: bicycle commuting expenses. Through 2025, you may deduct qualified bicycle commuting reimbursements as a business expense, but the full amount of the reimbursement is taxable to the employee. Note You can still give these benefits to employees, but you can't take a tax deduction for them as a business expense, and they will probably be taxable to the employee. Commuting Benefits Taxable to Employees This section deals with commuting benefits for employees and if they are taxable to the employee. There are two kinds of benefits: de minimis (small amounts) and qualified. De Minimis Transportation Benefits De minimis benefits are small amounts given infrequently, for which accounting would be unreasonable or impractical. For example, if you give an employee cab fare one time to get home because they missed the last bus while working late at your request, that's de minimis. Note To be considered as de minimis, the payment must be infrequent and for a small amount. A benefit can't be de minimis if it's based on hours worked. Those payments are wages and they get into minimum wage and overtime issues. If the payment or reimbursement is de minimis, you don't have to include it in the employee's taxable wages. You don't have to include de minimis benefits for public transit passes, tokens, or fare cards for public transit systems, up to $21 a month, in an employee's wages. You can also give employees a voucher or reimburse them, up to the same $21 a month. If you reimburse employees, you must have a way to verify that they are using public transportation for commuting. Qualified Transportation Benefits You can provide certain qualified transportation benefits to employees without including them in the employee's taxable wages or salary, up to specific limits. These transportation are included: Ride in a commuter highway vehicle between the employee's home and workTransit passQualified parking A commuter highway vehicle seats at least six adults (not counting the driver). At least 80% of the mileage must be for transporting employees between home and work and at least half of the seats (not counting the driver) must be for employees. A transit pass is a pass, token, fare card, voucher, or something similar that entitles someone to ride free or at a reduced rate on mass transit or a vehicle for hire with seats for six adults (not counting the driver). Qualified parking is parking your business reserves for employees near your office or near mass transit, commuter highway vehicles, or carpools. It doesn't include parking at or near an employee's home. Monthly Limits on Transportation Benefits You can only give employees a limited amount to be excluded from their taxable wages or salary: $280 a month for combined commuter highway vehicle transportation and transit passes$280 a month for qualified parking If you give employees more than these amounts, you must include the excess in their taxable pay. Reimbursement Verification Required What makes these benefits "qualified," meaning not taxable to employees, is the existence of a reimbursement arrangement. To be able to exclude these benefits from employee wages, you must have a specific reimbursement plan in place. The plan must require employees to verify the expenses before you reimburse them. You may also give employees vouchers if they follow detailed protocols for verifying how the voucher was used. Frequently Asked Questions (FAQs) Are commuter benefits taxable? Yes, some commuter benefits are taxable. Generally speaking, any amount over $280 a month for qualified transportation benefits is included in an employee's taxable wages. What is the IRS limit for commuter benefits? The IRS allows up to $280 a month for combined commuter highway vehicle transportation and transit passes, and for qualified parking. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. "Publication 535 (2021), Business Expenses," Click on "Transportation (commuting) benefits" in left sidebar. IRS. "Employer Update." IRS. "De Minimis Fringe Benefits." IRS. "Publication 15-B (2022), Employer's Tax Guide to Fringe Benefits," Click on "Qualified Transportation Benefits" in left sidebar. IRS. "Publication 15-B (2022), Employer's Tax Guide to Fringe Benefits," Click on "De Minimis Transportation Benefits" in left sidebar.