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Five Ways to Cut Your Commuting Costs

Five Ways to Cut Your Commuting Costs

Kim Lankford |

Take Advantage of Benefits from Your Employer

The federal and most state governments offer big tax breaks for commuters. These laws allow employees to spend up to $105 per month in pretax money on transit passes or van-pool expenses and up to $205 per month in parking benefits, as long as their employer offers the benefit. Like money you contribute to a 401k or flexible-spending account, what you spend on transit passes or parking lowers your taxable income and thus your tax bill. If you’re in the 25 percent federal tax bracket, you’ll only pay about $48 for a $64 pass — and even less when you subtract state and FICA taxes.

Some states offer more benefits. For example, Maryland offers employers an extra 50 percent tax credit for providing transit passes. If the employer gives the employee the pass rather than having the cost deducted from their paycheck, the company can take a federal and state tax deduction as a business expense plus get the 50 percent Maryland tax credit. As a result, an employer ends up paying about $11 for a $64 transit pass if the employee is in the 25 percent tax bracket, says Alves.

If your employer doesn’t provide these perks, lobby for them. They cost the employer little or no money but are valuable employee benefits that can attract workers and help them save. “A typical commute costs about $1,000 a year, and this will save them about $400,” says Jon Kessler, chairman of WageWorks, a company that helps employers administer these plans.

Next page: Look for Other Transit Discounts