Update on Qualified Transportation Benefits Under Tax Reform

Note: This article, originally published on February 21, 2018, has been updated to include the latest developments regarding the Tax Cuts and Jobs Act.

Prior to passing the Tax Cuts and Jobs Act of 2017, certain transportation benefits and, in some rare cases, onsite athletic facility benefits were treated as tax exempt to employees — and tax deductible to employers. This is no longer the case.

Beginning January 1, 2018, for the benefits listed below, there has been a change in the tax law. Originally, the changes appeared to allow employers to determine the taxability of the employee benefits by whether the employer took a tax deduction for the cost of said benefits.

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Should Employee Benefits be Treated as Exempt or Taxable?

Note: This article has been substantially updated since its February 21, 2018 publish date. Please refer to the latest article here.

Note: This article, originally published on January 1, 2018, has been updated to include the latest developments regarding the Tax Cuts and Jobs Act. The new information will be in blue italics.

Certain transportation and, in some cases, onsite recreational facility benefits have been treated as tax exempt to employees, and tax deductible to employers prior to passing the Tax Cuts and Jobs Act of 2017.

However,

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Changes to Employee Benefits Resulting from Tax Reform

The Tax Cuts and Jobs Act, signed into law on December 22, 2017, contains provisions that directly impact certain benefits commonly provided to employees.  Employers should be aware of these changes and the effective dates of each change, as it may require changes to payroll, federal income tax withholding, and both the employer and employee share of payroll taxes.  Employers should understand these changes and update payroll procedures as soon as possible.

Bicycle Subsidies

Beginning on January 1, 2018, amounts an employer provides to employees to subsidize commuting by bicycle must be included in the employees’ taxable wages.  Prior to 2018, employers could provide up to $20 a month to employees commuting by bicycle and exclude this amount from taxable compensation for its employees.

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