One way to provide incentive for these other options is through Parking Cash Out, where employees can choose the cash benefit and commute by these alternative modes. An employee may receive the benefit in addition to their current wages. Specifically, they can receive transit, vanpool, and parking benefits completely free of all U.S. payroll and Federal income taxes . The employer pays for the benefit and receives a deduction from his Federal business income taxes for the value of the benefit. The employer also does not pay payroll related taxes or costs on the benefit.
Employee pays no payroll or income taxes on benefit.
Employer and employee experience same tax savings as above. An employer may permit employees to set aside some of their income, before taxes , to pay for their commutes. Employees may use this pre-tax income to pay for transit, vanpools, or parking. Employees would not pay Federal income taxes or payroll taxes on the amount they elect to set aside for the commute option, and employers would not pay U.S. payroll taxes or other payroll related costs since the amount is treated as a benefit rather than as taxable salary. Employers may share the cost of commuting to and from work with their employees.