Transportation fringe benefits limits are rising next year

The IRS has unveiled a notice that lays out cost-of-living adjustments for employee qualified transportation fringe benefits for 2022. The combined monthly limit for transportation in a commuter highway vehicle and a transit pass will increase to $280 in 2022, up from $270. this year. The monthly limit in 2022 for qualified parking will also increase to $280 from $270.

The IRS allows employers to offer qualified transportation benefit programs to their employees tax-free. Under these programs, employees can have money withheld from their taxable compensation to pay or reimburse work-related expenses for qualified parking, transit passes, and transportation in certain commuter highway vehicles (such as qualifying van pools). Employers don’t get a deduction for providing the tax-free benefits to their workers.

IRS regulations establish a maximum monthly amount of qualified transportation benefits employees may exclude from their income, subject to cost-of-living adjustments announced by the IRS before each calendar year. Both employee pre-tax salary deferrals and employer-paid benefits, if any, count toward the maximum amount.