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Nanny: Transportation Allowances

Updated 11/2007

The monthly limit for transit passes and commuter highway vehicles that are qualified transportation fringe benefits is $115.00 in 2008. The monthly limit for the qualified parking benefit will increase to $220 in 2008, up from $215 in 2007.

The Transportation Equity Act for the 21st Century (known as TEA-21) established and adopted by the U.S. Congress in 1999 allows employers to offer to their employees a pre-tax fringe benefit for qualified transportation. In January 2000, the IRS issued regulations under IRS Code Sec 132(f)(4) to administer this plan.

Qualifying are any transit pass, voucher, token or fare card, or the reimbursement for them up to $110.00 per month (CY 2007). While the legislation clearly intends for the employer to provide the actual transit pass, not a cash advance for its purchase, cash reinbursement is allowed if the employer can demonstrate that they would incur a significant administrative expense if they pre-purchased and distributed the pass.

The provision of transit passes by employers to employees, subject to the monthly limits, is a pre tax benefit. Everyone wins because taxes are reduced for employers as well as employees.

Other helpful information:

 IRS Guidance: Transportation Fringe Benefits

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