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Last night, Congress passed the “American Taxpayer Relief Act of 2012”, and when it is signed into law, the tax-free transit benefit monthly maximum will increase to $245.00 per month. As part of the bill, Congress voted to re-establish transit benefit parity with the parking benefit for the 2013 calendar year. Since the 2013 tax-free maximum for the parking benefit is $245.00 per month, transit benefits will therefore increase to $245.00 maximum per month. In short, this means employees can receive an additional $115.00 per month in tax-free transit benefits with this increase from $125 to $245 maximum per month.
The full version of the “American Taxpayer Relief Act of 2012” can be found here. The applicable language is found in section 203 and states:
“SEC. 203. EXTENSION OF PARITY FOR EXCLUSION FROM INCOME FOR EMPLOYER-PROVIDED MASS TRANSIT AND PARKING BENEFITS.”
(a) IN GENERAL.—Paragraph (2) of section 132(f) is amended by striking ‘‘January 1, 2012’’ and inserting ‘‘January 1, 2014’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to months after December 31, 2011.”
The bill’s language is applied to the underlined sentence in Paragraph 2 of 132(f), as shown below:
(f) Qualified transportation fringe
(1) In general
For purposes of this section, the term “qualified transportation fringe” means any of the following provided by an employer to an employee:
(A) Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employee’s residence and place of employment.
(B) Any transit pass.
(C) Qualified parking.
(D) Any qualified bicycle commuting reimbursement.
(2) Limitation on exclusion
The amount of the fringe benefits which are provided by an employer to any employee and which may be excluded from gross income under subsection (a)(5) shall not exceed—
(A) $125.00 per month in the case of the aggregate of the benefits described in subparagraphs (A) and (B) of paragraph (1),
(B) $245.00 per month in the case of qualified parking, and
(C) the applicable annual limitation in the case of any qualified bicycle commuting reimbursement.
In the case of any month beginning on or after the date of the enactment of this sentence and before January 1, 2014 (changed from 2012 per American Taxpayer Relief Act, Sec. 203), subparagraph (A) shall be applied as if the dollar amount therein were the same as the dollar amount in effect for such month under subparagraph (B).
The second provision of Sec. 203, Effective Date, allows for retroactivity back to January 1st, 2012 if an employer so chooses. But even if an employer chooses not to provide retroactivity, going forward for the 2013 calendar year, the monthly maximum for transit benefits is $245.00 per month.
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