When most of us hear sensational financial news like the debt ceiling or the fiscal cliff, it’s better to tune out the noise than get involved in stale political debates.
But there was a little-reported result of the fiscal cliff deal that can help you save money right away: the restoration of the IRS commuter tax benefits.
Back in 2011, employees could take advantage of both commuter tax benefits by using tax-free dollars towards their work-related parking costs ($230 per month) and their public transportation costs ($230 per month).
The public transportation portion of that was reduced to $125 per month in 2012, cutting a valuable benefit for transit riders.
With the fiscal cliff deal, Congress retroactively (to January 1, 2012) increased the commuter tax benefit to $240 per month and $240 per month for parking. For 2013, those amounts will be $245.
Get your employer on board in offering commuter tax benefits
The benefit can be provided to you, the employee, as a pre-tax employee-paid payroll deduction, a tax-free employer-paid subsidy, or a combination of the above.
It works out for you either way, though. If you use pre-tax dollars, you spend less than buying your transit passes with money from your paycheck, and if you receive a subsidy from your employer, your transportation costs can be significantly reduced.
There are commuter tax benefits for the employer as well if they provide you with a subsidy. If you still need to use paid parking when using transit, you can apply the same benefits to your parking costs, for a total of $480 per month.
So if you are paying after-tax dollars for your transportation costs, see your employer right away to start saving money.
Enjoy riding transit and save money
If you’ve never ridden the bus or train before, it can take some getting used to. Late buses and overcrowded trains are a hassle, but try taking transit a few times and see if you don’t enjoy saving money on gas and parking.
It doesn’t have to be every day. You could save by combining some public transit with carpooling as well.
Here are a few ways to make commuting to work more convenient:
- Know the schedule, and get to the stop a few minutes early.
- Have exact change or get a transit card so you don’t have to fumble with coins.
- Enter from the front and exit in the back if you’re riding a bus.
- Bring a book for long rides.
- If you buy a monthly pass, take transit on the weekends to explore new places.
Transportation costs eat into our income but you can save money now just by asking a few questions of your employer or making the switch to public transit!