IRS News Release  
December 29, 1993

Certain Commuting Benefits Provided by
Employers are Tax Free

WASHINGTON - The amount of employer provided parking, van pool services or mass transit passes that is tax free to employees is changed starting with 1993 tax returns.

Up to $155 per month in employer provided parking, including carpool parking, is tax free. Up to $60 per month in employer provided van pools, mass transit passes or a combination of the two, is also tax free.

Congress made the changes with the Energy Policy Act of 1992. Previously, no part of employer provided van pooling was tax free, up to $21 a month in employer provided van pooling was tax free, up to $21 a month in employer provided transit passes were tax free and all employer provided parking was tax free.

Amounts over the new monthly tax free thresholds are taxable. Employers are responsible for determining the taxable amount of these benefits is also subject to employment tax.

According to IRS, until March 31, 1994 employers may use any reasonable method to determine if any amount of parking, van pooling or mass transit passes is taxable. However, after March 1994, employers must value these benefits according to what an individual would normally pay in an arms length transaction.

IRS said employers who provide parking, van pooling and mass transit passes may aggregate taxable amounts, including them in employees' income and paying employment taxes periodically or at least once a year.

Employers who do not directly provide the benefits, but instead reimburse employees for parking, van pooling or mass transit expense, must include any taxable portion in employees' wages and pay employment taxes when the reimbursement is paid.

The guidance issued today by the IRS is in Notice 93-3, which will appear in Internal Revenue Bulletin 1994-3, dated Jan. 18, 1994.

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