The IRS allows employers to offer tax‑free commuting benefits under Section 132(f) of the Internal Revenue Code, as outlined in IRS Publication 15‑B. These benefits include transit passes, vanpooling, and qualified parking, all of which can be excluded from an employee’s taxable income when provided within federal limits.
For 2026, the IRS sets two separate monthly exclusions:
- $340 for qualified parking, and
- $340 total for transit passes and vanpooling combined.
Employees may receive both benefits in the same month, up to each individual limit. Employers can offer these benefits directly, through pre‑tax payroll deductions, or via properly substantiated reimbursement arrangements.
Since IRS rules and limits can change—and employer deduction restrictions remain in effect, it’s important for organizations to keep their commuter benefits programs aligned with current federal guidance.
Download the latest Qualified Transportation Fringe Benefits Guide.