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Tax Advantages of Employer Contribution
Tax-free transit benefits provided as an employer contribution allows you to give your employees up to $110 per month in benefits to commute to work by transit or rideshare. You pay for the benefit and receive an equivalent deduction from your business income taxes. Employees receive the benefit completely free of all payroll and income taxes, in addition to their current compensation.
| Assumptions: | Employee pays 27.5% in federal income tax
Employee pays 6% in state income tax
Employer pays 30% in federal/state income tax |
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If the employer provides $110 per month ($1,320 per year) in tax-free transit benefits this is the value to the employee:
| Employee value | Private employer(for profit) | Non-profit/Federal employer(FERS) | Government employer(CSRS) |
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| Base amount | $1,320 | $1,320 | $1,320 | | Federal income tax saved (27.5%) | $330 | $330 | $330 | | Employee FICA (7.65%) saved* | $100.98 | $100.98 | $100.98 | | State income tax saved (6%) | $75.90 | $75.90 | $75.90 | | True value to employee | $1,826.88 | $1,826.88 | $1,826.88 |
* Civil service column uses only Medicare tax rate (1.45%), not full FICA rate.
This is the cost to the employer: | Employer costs | Private employer(for profit) | Non-profit/Federal employer(FERS) | Government employer(CSRS) |
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| Base amount | $1,320 | $1,320 | $1,320 | | Employer FICA (7.65%) saved* | ($100.98) | ($100.98) | ($19.14) | | Employer unemployment tax saved* | ($75.90) | ($75.90) | ($75.90) | | Less 30% Fed/state tax deduction | ($396) | 0 | 0 | | Net cost to employer | $747.12 | $1,143.12 | $1,224.96 |
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