This section discusses exclusion rules that apply to benefits you
provide your employees for their personal transportation, such as
commuting to and from work. These rules apply to the following
- De minimis (minimal) transportation benefits.
- Qualified transportation benefits.
Special rules that apply to demonstrator cars and qualified
nonpersonal-use vehicles are discussed under Working Condition
De Minimis Transportation Benefits
You can exclude the value of any de minimis transportation benefit
you provide to an employee from the employee's wages. A de minimus
transportation benefit is any transportation benefit you provide to an
employee that has so little value (taking into account how frequently
you provide transportation to your employees) that accounting for it
would be unreasonable or administratively impracticable. For example,
it applies to occasional transportation fare you give an employee
because the employee is working overtime, if the benefit is reasonable
and is not based on hours worked.
For this exclusion, treat any recipient of a de minimis
transportation benefit as an employee.
Qualified Transportation Benefits
This exclusion applies to the following benefits.
- A ride in a commuter highway vehicle between the employee's
home and work place.
- A transit pass.
- Qualified parking.
The exclusion applies whether you provide one or a combination
of these benefits to your employees.
Qualified transportation benefits can be provided directly by you
or through a bona fide reimbursement arrangement. However, cash
reimbursements for transit passes qualify only if a voucher or a
similar item that the employee can exchange only for a transit pass is
not readily available for direct distribution by you to your employee.
You can exclude qualified transportation fringe benefits from an
employee's wages even if you provide them in place of pay.
Commuter highway vehicle.
A commuter highway vehicle is any highway vehicle that seats at
least 6 adults (not including the driver). In addition, you must
reasonably expect that at least 80% of the vehicle mileage will be for
transporting employees between their homes and work place, with
employees occupying at least one-half of the vehicle's seats (not
including the driver's).
A transit pass is any pass, token, farecard, voucher, or similar
item entitling a person to ride, free of charge or at a reduced rate,
one of the following.
- Mass transit.
- In a vehicle that seats at least 6 adults (not including the
driver) if a person in the business of transporting persons for pay or
hire operates it.
Mass transit may be publicly or privately operated and includes
bus, rail, or ferry.
Qualified parking is parking you provide to your employees on or
near your business premises. It also includes parking on or near the
location from which your employees commute to work using mass transit,
commuter highway vehicles, or carpools. It does not include parking at
or near your employee's home.
For this exclusion, treat the following individuals as employees.
- A current employee.
- A leased employee who has provided services to you on a
substantially full-time basis for at least a year if the services are
performed under your primary direction or control.
Exception for S corporation shareholders.
Do not treat a 2% shareholder of an S corporation as an employee of
the corporation. A 2% shareholder is someone who directly or
indirectly owns (at any time during the year) more than 2% of the
corporation's stock or stock with more than 2% of the voting power.
Relation to other fringe benefits.
You cannot exclude a qualified transportation benefit you provide
to an employee under the de minimis or working condition benefit
rules. However, if you provide a local transportation benefit other
than by transit pass or commuter highway vehicle, or to a person other
than an employee, you may be able to exclude all or part of the
benefit under other fringe benefit rules (de minimis, working
Exclusion from wages.
You can generally exclude the value of transportation benefits you
provide to an employee during 2001 from the employee's wages up to the
- $65 per month for combined commuter highway vehicle
transportation and transit passes.
- $180 per month for qualified parking.
Benefits more than the limit.
If the value of a benefit for any month is more than its limit,
include in the employee's wages the amount over the limit minus any
amount the employee paid for the benefit. You cannot exclude the
excess from the employee's wages as a de minimis transportation
For more information on qualified transportation benefits,
including van pools, and how to determine the value of parking, see
Notice 94-3 in Cumulative Bulletin 1994-1.