This new fringe benefit will be available in 1999. These limits will be indexed for inflation. Before the start of the plan year, individuals employee elected to set aside a certain amount of pre-tax salary to cover qualified costs incurred in commuting to work. Sole proprietors, partners, independent contractors, and two- percent shareholders of S corporations are not eligible for this transportation fringe benefit. Commuter highway vehicles may be owned or leased by an employer to be used by employees or a third-party provider for transportation purposes.
Employees can also own and operate commuter highway vehicles.
Depending on state law, individuals may also avoid state and local income taxes on earnings set aside. The employee's future social security benefits may be slightly lower because the amounts set aside for the transportation costs are not subject to FICA tax. In most cases, this reduction in the social security wage base will have a nominal effect on future social security benefits. These are some thoughts to consider about the transportation fringe benefits. Your financial advisor can also provide additional information and should be consulted before any action is taken.