In 1998, Congress approved legislation that allows employees of corporations to pay for parking and transit (including vanpool) with pre-tax dollars while employers enjoy lower overall payroll taxes.  These benefits are found in Internal Revenue Code (IRC) Section 132(f) Commuter Choice Benefits. 

Additional information can be found at the EPA - Commuter Choice Leadership Initiative and at the   Association of Commuter Transportation websites.  

These tax incentive benefits include:

Employer-paid Benefits: Employer can pay for their employees to commute by transit or vanpool, up to a limit of $100/month.  With this arrangement, federal exempts up to $100 per month in transit benefit from federal income and payroll taxes, and generally state and local taxes as well.  The employer in this case effectivelly provides his or her employees with a tax-free transportaiton bonus.  Employers can also share the cost of commuting with their employees by paying for part of the transit commuter benefit, and allowing employees to pay for the remainder using pre-tax dollars.  That can be as much as $1,200 a year in pre-tax savings! 

Employee-paid Benefits:  Employers can allow employees to elect to exchange up to $100/month in taxable salary for tax-free transit or vanpool benefits. This is done by deducting the cost of the transit commuter benefits received by an employee from the employee's paycheck.  Such pre-tax deductions from an employee's pay are comparable to those often used to pay for medical benefits, or retirement benefits under a 401(k) plan.  Employers save money overall since the amount exchanged is not subject to payroll taxes.  Employees also save money since the amount of an employee's salary exchanged for transportation benefits is not subject to federal income tax and payroll taxes. 

Employer Assistance

The Chicago Area Transportation Study (CATS) can provide employers with a complete transportation analysis of all modes (transit, vanpool, carpool, walking, bicycling) used by employees.  For more information on services available to employers, visit Share the Drive or call (800) 920-RIDE.  

In addition, RTA provides a Transit Benefit Program which allows employers and its employees to take advantage of these tax incentives.