How much can employers save by offering commuter benefits?

Commuter benefits are a great way for employees to save money on their commutes, but newsflash – employers can save money, too. Read on to learn when commuter benefits save employers money, and how to calculate the savings.

What are commuter benefits?

Just like retirement and healthcare, the IRS allows employees to set aside some of their income before it’s taxed for use on their commutes. In 2026, employees can set aside up to $340 a month for commuter parking and another $340 a month for transit or vanpooling. Employees can only set aside this income tax-free if their employer has a commuter benefit program. If an employer doesn’t “offer commuter benefits”, the employer has to pay for their parking and transit with their after-taxed income. 

Employees’ savings quickly add up with a commuter tax benefit program. Most employees pay about 30% of their income on taxes, so by setting aside $100 a month, for example, to pay for transit, an employee would effectively save $30 a month. That rolls up to $360 a year! But they’re not the only ones that save money.

Reducing FICA Taxes

Employers are taxed on the amount of income that their employees earn. These are known as “FICA taxes” (named for the Federal Insurance Contributions Act), and they currently add up to 7.65% of the employees’ taxable income: up to 6.2% for Social Security and 1.45% for Medicare.

This means that for every $100 that an employee’s income is reduced, the employer saves $7.65. An employer looking to reduce their taxable burden might look for ways to reduce their employees’ taxable compensation. Savvy employers look for ways to reduce their employees’ taxable income through the use of tax-free benefits. Enter: commuter benefits.

In locations where transit doesn’t exist or free parking is plentiful, commuter benefits aren’t going to be of much help. But companies with locations in areas with even basic transit or expensive parking look at these costs as a way to reduce their tax bill.

Show me some numbers

Consider a company with 100 employees in a vibrant, downtown location. If they began offering pre-tax commuter benefits to their employees, how much money could the employer save?

If every employee is spending $100 a month on a transit or parking pass:

• These employees are collectively spending $120,000 a year on commuting.
• The employees would collectively save $36,000 by paying for their commute expenses through a pre-tax commuter benefit.
• The employer could reduce their FICA taxes by $9,180 a year by offering this pre-tax benefit. If the employer is in a region with additional payroll taxes, these savings could be even greater.

Consider the same example in a pricier city, like Boston or San Francisco, where monthly commuter rail passes can cost hundreds of dollars a month and garage parking can easily exceed $500 a month. Letting those 100 employees take advantage of the maximum pre-tax contribution and put $340 aside either for commuter parking or transit every month would save this hypothetical employer $31,212 a year!

Continue the conversation

Ask your employees how they’re getting to work and what they’re paying to do so. It doesn’t take much for their commute costs, and your potential tax savings, to outweigh the costs of administering or contracting out a commute benefit program. Get in touch with Jawnt today to plug in your own numbers and learn more.