The tax relief that is currently claimed by employees who commute to work using trolley, train, subway, buses, and ferry is expected to reduce come 2012. The current benefit of $230 a month was included in the 2009 stimulus package law and was set to expire on December 31, 2011. After this expiry date, the rates will go down to the pre-stimulus-package rate of $125 a month starting January 2012 unless Congress makes a last minute adjustment. However, the counterpart parking tax benefit that is given to those who drive themselves to their place of work has been adjusted upwards. The rate that stood equal to the commuter tax benefit at $230 a month is set to go up to $240 a month starting January 2012. Commuters and other stake holders are urgently agitating for the review of the commuter benefit to at least have it match the parking tax benefit.
Employers Update Employees with Expected Drop
Many employers have already communicated the expected reduction on the commuter benefit to the affected employees. The human resource departments communicate these changes to employees before making adjustments to their payroll systems to capture the changed rates. If the commuter tax benefit amount is to be adjusted upwards, it will have to be done before the new year as an adjustment within the year – even if applied retrospectively – would lead to a lot of inconveniences and paperwork for those involved with the payroll. The government therefore, avoids making such adjustments unless they are very necessary.
Impact of Change on Commuters
The drop from claiming a benefit cap of $230 a month in 2011 to claiming a maximum of $125 a month in 2012 is expected to significantly affect the commuters. For example, a commuter who earns income in the 40% tax bracket and who took the full $230 benefit in 2011 will lose out on tax savings amounting to $504 from making this 2012 adjustment on the commuter benefit. Different commuters will see their former tax benefits reduced in different amounts. Employers are now finding that employees who commute from far will lose a significant chunk of their former tax benefits.
Commuters and Stake Holders Championing for Adjustment
There are various campaigns that have been launched to advocate for an adjustment to be made to the commuter benefit before the new year begins. Those advocating for the change argue that it is unfair for the parking benefit to be increased as that of the commuter benefit is reduced. They are arguing that the government should be encouraging mass transport means as opposed to individual transport that leads to more pollution and traffic. The main campaign for an increase in the commuter benefit is being championed by the benefit providers including TransitCenter and WageWorks. This campaign is being run on commuterbenefitworkforus.com. The website enables commuters to communicate with their Congress representatives to urge them to campaign for an adjustment to be made on the commuter benefit.
Two Proposed Laws to Remedy
In respond to the campaign to adjust the commuter benefit, there have been two laws that have been proposed in Congress. One of these bills is the Commuter Benefits Equity Act of 2011 that seeks to keep the parking tax benefit equal to that of the commuter benefit. The other proposed law is the Commuter Relief Act that seeks to have both the parking and commuter tax benefit at $200 and to introduce a further tax benefit for those who cycle to work. However, many tax experts foresee that a permanent solution may not be passed and instead, an extension on the 2011 commuter benefit will be passed through the “Extender Tax Laws” that are being temporarily passed until December 2012.