Commuting Tax Benefits Help Employers Recruit, Retain Talent

More employers in cities around the country are offering tax-free commuter benefits to recruit and retaintalent.

According to a survey of 245 human-resources professionals released in September, 31% of employers nationwide offer commuter benefits this year, compared with 19% in 2006. These benefits typically enable employees to reduce their taxable income and cut their commuting costs by an average of 30%.

The survey, conducted by TransitCenter Inc., a NY nonprofit that promotes the use of mass transit, shows 17% of employers were planning to add commuter benefits to their employee packages in the coming year, compared with 5% the year before. Survey respondents were from major metropolitan areas across the country, such as NY, Los Angeles and Chicago.

When one woman moved to Great Neck, NY, this year from Queens, NY, her commuting costs jumped from $76 a month to $240. She said that was painful. Then she discovered that her employer offers commuter benefits. She now pays $110 of her commuting costs with her pretax salary, the limit allowed this year by the IRS for mass transit. She pays a remaining $130 of her commuting costs after taxes. The money is automatically deducted from her paycheck. She says she is "saving so much in terms of taxes."

The company where she works began offering the perk five years ago. 55% of employees in NY and surrounding areas use it today, said a woman who manages the mass-transportation discount program at the company. Only 10% to 15% of employees were participating in the program when it was first launched.

Five years ago, said the Senior VP at a staffing and recruiting firm, employers increasingly were covering the cost of parking for employees. But as parking costs in major metro areas rose, employers found that benefit to be too expensive. Many began offering tax-free commuter benefits instead.

For the past two years, a NY-based insurance group has paid for commuting costs for employees up to the IRS's annual limit. The company introduced the benefit to help recruit and retain employees.