Save Travel Money With This Often Overlooked Employee Tax Credit
Whether it’s road tolls or subway fares, your commuting to work can increase over time. To help cut costs, your employer may offer commuter tax incentives.
Certified Financial Planner ™ Matt Shapiro of LearnVest says that even if your company doesn’t reimburse your travel costs, they can offer this common way to save money:
“If you pay to park at work or use public transportation to get to work, many businesses will allow you to deduct these costs from your pretax paycheck,” Shapiro says, adding that these costs (such as subway fares or permits parking) are, in fact, an operating cost. “This is one of those things that people probably overlook when they sign up for benefits on their second day of work. If they don’t understand this earlier than five years from now, they will miss out on five years of a small tax break. ”
In short, commuter tax credits do not reimburse your travel expenses, but they do avoid paying taxes on those expenses. In other words, you use pretax dollars to pay for commuting.
According to the National Center for Transit Studies :
Most employees can get up to $ 255 a month to buy passes, commuter vehicles, and / or pay to park at their employer. This subsidy amount will not appear on the W-2 form as income … Employee pays pretax income travel to work up to the statutory limit of $ 255 per month and earns more after tax expense income … Employee can combine benefit pre-tax with employer subsidies up to $ 255 per month for each payment for transit tickets, motorway passes and / or parking fees
LearnVest suggests talking to your company’s HR department to see if this benefit is available. For more details, check out the full publication at the link below.
4 Easy Ways To Make Your Money Work More For You | LearnVest