Do I have to pay taxes on my commuter benefits?

Lots of employers provide fringe benefits to their employees, but what about benefits that help you with the cost of commuting to and from work? Do you have to pay taxes on those? As with many tax-related questions, the answer is: It depends. 

Per the IRS, you don’t have to pay tax on a fringe benefit that is classified as a “qualified transportation fringe”. These benefits include:

• A ride in a commuter highway vehicle between the employee's home and work place: A qualified commuter highway vehicle is any highway vehicle that seats at least six adults (not including the driver). In addition, the employer must reasonably expect that at least 80% of the vehicle mileage will be for transporting employees between their homes and workplace with employees occupying at least one-half the vehicle's seats (not including the driver's).
• A transit pass: You may receive the pass directly, or you may receive reimbursement for what you pay for the pass. However, reimbursement for transit passes is only considered a non-taxable fringe benefit if transit vouchers or similar items, which are redeemable solely for transit passes, are not readily available for the employer to distribute directly to the employee. If such passes or vouchers are easily accessible for direct distribution, then providing cash reimbursement instead would not qualify as a non-taxable benefit. 
• Qualified parking: Qualified parking is parking provided to you by your employer on or near their business premises. It includes parking on or near the location from which you commute to work using mass transit, commuter highway vehicles, or carpools. It doesn't include parking at or near your home.

For 2025, the monthly exclusion limit for qualified parking is $325 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $325. Any amount you received above the limit would be taxable and included in your W-2 wages.

If your employer provided taxable fringe benefits, they should be included on your Form W-2 in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. 

However, if they provide you a vehicle, they must include the value of any personal use in boxes 1, 3, and 5 of Form W-2. They must withhold Social Security and Medicare taxes, but have the option not to withhold federal income tax if they notify you and include the value of the benefit in boxes 1, 3, 5, and 14. 

So, just entering the information shown on your W-2 will take care of your reporting requirement if your commuter benefits are taxable.

Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement) so you can see how much of your taxable wages was from taxable fringe benefits.

For more information on this topic, see IRS Publication 15-B.