On December 22, 2017, President Donald Trump signed H.R. 1 (formerly known as the 2017 Tax Cuts and Jobs Act) into law; Congress passed the bill on December 20. The tax reform bill will be in effect from 2018 through 2025, and beyond. This piece of legislation affects many Americans and their benefits, including contributions to transit/commuter benefits and eliminates the individual mandate for health insurance. Below is a quick overview of how the tax reform bill affects two employee benefits:
In October 2017, the IRS released new contribution limits for 2018. The new monthly limits are:
- Parking – $260
- Mass Transit – $260
- Commuter vehicles – $260
- Bicycle – $20
However, unlike in previous years, in 2018 employers may no longer claim the business deduction for qualified mass transit and parking benefits unless it’s necessary for ensuring the safety of an employee. Employees can continue to enjoy the pre-tax benefit through employer-sponsored benefit accounts.
According to the Society for Human Resource Management (SHRM), the bicycle benefits are being treated differently:
“The legislation suspends the exclusion from gross income and wages for qualified bicycle commuting reimbursements for taxable years beginning after Dec. 31, 2017 and before Jan. 1, 2026. This means that employer reimbursements for bicycle commuting expenses are taxable and subject to payroll taxes and income tax withholding.”
SHRM concludes that this means some companies will stop subsidizing their employees’ mass transit and parking expenses. Nevertheless, employees may still contribute to a commuter/transit account.