Don't overlook payroll taxes (a.k.a. OASDI and Medicare, "social security"). If a benefit otherwise taxed as regular income can instead be provided "pretax" it reduces the social security and Medicare taxes for both the employee and the employer. This rate is presently 7.65% each.
I am not a tax or payroll professional, but I'm pretty sure the analysis next is correct; if not - someone please correct me. :) Employees who have an employer-provided automobile parking space and who must pay a parking fee through a payroll deduction can have the deduction taken out pretax which has the double benefit of reducing the employee's taxable income (for purposes of regular income taxes) and reducing OASDI and Medicare taxes. My employer does this. It means a $20/month parking fee (for example) really only costs the employee $18.47 and also saves the employer $1.53 in payroll taxes. Also the cost of parking at $18.47/month is then not used when calculating income tax withholding on each paycheck. Assuming a 25% tax bracket, your monthly take home pay increases by $4.62. So your $20/month parking space really only costs you $13.85 and your employer gets to pocket $1.53. What a great deal. The problem, of course, is that the bicycle rider doesn't typically have a mandatory unreimbursed expense like a parking fee by the employer. So it is much more difficult to implement the tax savings to everyone's benefit. -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Ross, Arthur Sent: Monday, January 04, 2010 12:42 PM To: [email protected] Subject: Re: [Bikies] Fed Tax Credit Chuck Strawser wrote <Another obstacle is cost. There is no benefit to the employer, only to the employee> My understanding is the opposite, employers benefit from offering the Bicycle Commuter Tax Benefit in the form of a reduction in their corporate income taxes. Thus there is no benefit to employers such as UW, State of Wisconsin, City of Madison, or even the BFW, since all are non-profits and do not pay corporate income taxes. For these employers, offering the Bicycle Commuter Tax Benefit would simply add to their costs. Arthur Ross, Pedestrian-Bicycle Coordinator City of Madison Traffic Engineering Division 215 Martin Luther King, Jr. Blvd., Suite 100 PO Box 2986 Madison, WI 53701-2986 608/266-6225 _______________________________________________ Bikies mailing list [email protected] http://lists.danenet.org/listinfo.cgi/bikies-danenet.org _______________________________________________ Bikies mailing list [email protected] http://lists.danenet.org/listinfo.cgi/bikies-danenet.org
