My employer said that pretax benefits for public transportation
just increased with passage of the fiscal cliff legislation, and
that I could increase the amount of money I'm setting aside for
commuting benefits. What are the new limits, and what do I need to
The law did increase the maximum amount you can set aside before
taxes to use for mass transit, such as the subway, bus or train. In
2012, you could set aside $240 per month from your pay before taxes
for parking but only $125 for public transportation. The new law
boosted the mass transit benefit to be in line with the parking
benefit, and both were also adjusted for inflation Now you can set
aside $245 per month for public transportation, plus $245 per month
for parking, for a total of $490 per month before taxes if you pay
for both parking and public transportation to get to work. You
generally set your contribution level for the year, but most
employers let you make a change in any month -- for example, to
suspend your contribution during a month when you're on a business
trip or vacation, or to adjust the allocation if you start driving
less and taking mass transit more (or vice versa).
Because the limits were lower last fall, when you designated how
much of your pay to set aside for transit benefits during open
enrollment, you will probably need to fill out a new form to boost
your contribution. (Some employers are asking all employees who use
the transit benefits to fill out a new form, even if they aren't
increasing their contribution.) Contact your human resources
department quickly so you can make changes in time for your next
Besides increasing the contribution levels for mass transit for
2013, the new law also increased them retroactively for 2012.
Employers are waiting for guidance from the IRS on how to handle
the retroactive change, says Jody Dietel, chief compliance officer
with WageWorks, which administers consumer-directed benefits.
For more information about pretax commuting benefits and a
calculator to help estimate your potential tax savings, see
Got a question? Ask Kim at firstname.lastname@example.org.