Transportation (Commuting) Benefits

This section explains exclusion rules that involve benefits you provide to your employees for their personal transportation, including commuting to and from work. These rules apply to the following transportation benefits.
De minimis transportation benefits.
Qualified transportation benefits.

Special rules that apply to demonstrator cars and qualified nonpersonal use vehicles are discussed under Working Condition Benefits, later in this section.

De Minimis Transportation Benefits

You can leave out the value of any de minimis transportation benefit you grant to an employee from the employee’s wages. A de minimis transportation benefit is any local transportation benefit you give to an employee if it has so little value (taking into account how frequently you provide transportation to your employees) that accounting for it would be unreasonable or administratively impracticable. For example, it puts on occasional transportation fare you give an employee because the employee is working overtime if the benefit is reasonable and is not based on hours worked.

Employee. For this exemption, treat any individual of a de minimis transportation benefit as an employee.

Qualified Transportation Benefits

This exclusion involves the following benefits.
A ride in a commuter highway vehicle between the employee’s home and work place.
A transit pass.
Qualified parking.
Qualified bicycle commuting reimbursement.

The exclusion applies whether you provide a single or a combination of these benefits to your employees. Qualified transportation benefits can be provided directly by you or through a bonafide reimbursement arrangement. However, cash reimbursements for transit passes qualify only if a voucher or a similar item that the employee can exchange only for a transit pass is not readily available for direct distribution by you to your employee. A voucher is readily available for direct distribution only if an employee can obtain it from a voucher provider that does not impose fare media charges or other limitations that effectively prevent the employer from obtaining vouchers. See Regulations section 1.132-9(b)(Q&A 16– 19) to learn more.

Oftentimes, you can leave out qualified transportation fringe benefits from an employee’s wages even if you provide them in place of pay. However, qualified bicycle commuting reimbursements cannot be excluded if the reimbursements are provided in place of pay. For information about offering qualified transportation fringe benefits under a compensation reduction agreement, see Regulations section 1.132-9(b)(Q&A 11– 15).

Commuter highway vehicle. A commuter highway vehicle is any highway vehicle that seats at least 6 adults (not including the driver). Moreover, you must reasonably expect that at least 80% of the vehicle mileage will be for transporting employees between their homes and work place with employees occupying at least one-half the vehicle’s seats (not including the driver’s).

Transit pass. A transit pass is any pass, token, fare card, voucher, or similar item entitling a person to ride, for free or at a reduced rate, on one of the following.
On mass transit.
In a vehicle that seats at least 6 adults (not including the driver) if a person in the business of transporting persons for pay or hire operates it.

Mass transit may be publicly or privately operated and includes bus, ferry, or rail. For guidance on the use of smart cards and debit cards to offer qualified transportation fringes, see Revenue Ruling 2006-57, 2006-47 I.R.B. 911, available at and Notice 2010-94, 2010-52 I.R.B. 927, available at

Qualified parking. Qualified parking is parking you provide to your employees on or near your business premises. It includes parking on or near the location from which your employees commute to work using mass transit, commuter highway vehicles, or carpools. It does not include parking at or near your employee’s home.

Qualified bicycle commuting reimbursement. For any calendar year, the exclusion for qualified bicycle commuting reimbursement includes any employer reimbursement during the 15-month period beginning with the first day of the calendar year for reasonable expenses acquired by the employee during the calendar year.

Reasonable expenses include:
The purchase of a bicycle, and
Bicycle improvements, repair, and storage.

These are considered reasonable expenses provided that the bicycle is regularly used for travel between the employee’s residence and place of employment.

Employee. For this exception, treat the following individuals as employees.
A current employee.
A leased employee who has provided services to you on a considerably full-time basis for at least a year if the services are performed under your primary direction or control.

A self-employed individual is not an employee for qualified transportation benefit purposes.
Exception for S corporation shareholders. Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation’s stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder.

Relation to other fringe benefits. You cannot get rid of a qualified transportation benefit you provide to an employee under the de minimis or working condition benefit rules. If you provide a local transportation benefit other than by transit pass or commuter highway vehicle, or to a person other than an employee, you may be able to exclude all or part of the benefit under other fringe benefit rules (de minimis, working condition, etc.).

Exclusion from wages. You can usually exclude the value of transportation benefits that you give to an employee during 2014 from the employee’s wages up to the following limits.
130 per month for combined commuter highway vehicle transportation and transit passes.
$250 per month for qualified parking.
For a calendar year, $20 multiplied by the number of qualified bicycle commuting months during that year for qualified bicycle commuting reimbursement of expenses incurred during the year.

Qualified bicycle commuting month. For any employee, a qualified bicycle commuting month is any month the employee:
1. Regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment and
2. Does not receive:
a. Transportation in a commuter highway vehicle,.
b. Any transit pass, or
c. Qualified parking benefits.

Benefits more than the limit. If the value of a benefit for any month is more than its limit, provide in the employee’s wages the amount over the limit minus any amount the employee covered the benefit. You cannot exclude the excess from the employee’s wages as a de minimis transportation benefit.

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