Pre-Tax Commuter Benefits: What to Expect from New Jersey Requirements

Pre-Tax Commuter Benefits: What to Expect from New Jersey Requirements

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An Update on New Jersey’s Pre-Tax Commuter Benefits

On the 1st of March, 2019 New Jersey rolled-out the qualified transportation fringe benefit that requires employers of 20 or more people to offer commuter and transit benefits on a pre-tax basis. Final rules and regulations are expected to be released in the coming months.

Earliest enforcement is anticipated for March 1st, 2020. To prepare, employers should look at current demographics of their staff and determine if offering commuter benefits would be required for their company.

The transit benefit ordinance is consistent with the Internal Revenue Code, Section 132(f). Under the new law, an employee is identified as anyone employed by the company who reports to the place of business of the employer, which mirrors the IRS unemployment law regarding compensation. There are exceptions for people employed by the federal government, and for employees covered by agreements of collective bargaining.

Paying an employee’s out of pocket commuter costs pre-tax reduces the amount of income tax that person will pay. In other words, gross income is reduced because the costs employees pay for commuting is taken out of their income before their income is considered for tax purposes.

Then, when the paychecks are cut, the taxable gross income is less. Lower gross income results in lower dollar amounts paid to the Internal Revenue Service (IRS) in taxes.

Your company could really shine by announcing this additional benefit.

Contact benefEx to discuss a wide variety of options for your employer benefits package plan.