Get your tax credits in order

Dear Readers:
This time of year my inbox is always full of questions about tax incentives for employers. So here is a brief rundown of some tax incentives your company won’t want to miss out on come April 15.

Employers and property managers can claim credits against B&O and public utility taxes when they provide financial incentives to their own or other employees for using ridesharing, public transportation, carsharing or non-motorized commuting. The amount of the credit is 50% of the amount paid, up to a maximum of $60 per employee per year. The state Legislature has provided for $2.25 million in credits each year, with an annual $200,000 cap per employer.

Allowing your employees to take pre-tax payroll deductions of up to $100 per month from their pay for transportation services can save both the company and the employee money on tax day. This pre-tax income can be used by the employee to cover bus, rail, ferry or vanpool fares. Pre-tax deductions are a win-win for everyone—employers pay less payroll tax and employees pay less income tax.

Another way companies can save is by offering tax-free transportation subsidies to employees. As with the payroll deduction, employers can offer employees a tax-free subsidy of up to $100 per month to be used for bus, rail, ferry or vanpool fares. Because the IRS considers transit subsidies a business expense, employers can deduct these expenses for tax purposes. And your employees get a great benefit that will save them money on their commute.

Keep your eyes peeled for increases in the pre-tax payroll deduction and tax-free subsidy limits this year. As we go to press, the United States Congress is considering legislation under the reauthorization of TEA-21 that would raise the maximum from $100 per month to a higher level.
HOV