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Qualified Transit/Parking Accounts

Qualified Transit/Parking Accounts

2020 contribution limit:

Transit/Vanpooling pre-tax monthly limit: $265

Qualified Parking pre-tax monthly limit: $265

This pre-tax employee benefits account’s purpose is to reimburse employees for eligible transit and parking expenses, up to the IRS statutory limit.

Since 1985, employers have been permitted to give the following transportation fringe benefits to employees on a tax-free basis:

  • qualified parking;

  • transit passes;

  • transportation in a commuter highway vehicle, if such transportation is in connection with travel between the employee’s residence and place of employment (also known as “vanpooling” like Uber or Lyft ).

Under general principles of taxation, all fringe benefits provided to an employee by his or her employer (including transportation plans) are taxable to the employee unless the Code provides a specific exclusion for the benefit.  For most transportation fringe benefits, the maximum amount that employees can exclude from income is subject to a statutory limit that is periodically adjusted for inflation.