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Bebeto Matthews / AP
About 2.7 million families will benefit from the tax break for taking mass transit.
Transit riders will get a bigger tax break this year, thanks to a provision tucked into the legislation that averted a fall off the fiscal cliff.
As part of the American Taxpayer Relief Act of 2013, Congress decided that for 2013 people who take mass transit to work will get the same pretax benefits as those who drive and pay to park their car. Both can set aside up to $245 a month to cover these expenses, if their employer offers such a plan.
That’s a big change from last year, when employees could set aside up to $240 a month to park, but only $125 a month for transit expenses. In 2011, the tax savings had been the same for parking or public transportation.
Now parity is back and that could mean more savings for transit commuters.
“Someone in the highest federal tax bracket – 30 to 39.6 percent – could save about $570 a year. Someone in the 15 percent tax bracket could save about $260 a year,” explained Lisa Greene-Lewis, lead CPA at the American Tax and Financial Center at TurboTax.
According to Bloomberg News, about 2.7 million families will benefit from this tax break.
“It’s not so much the dollar value; it’s the parity,” said Jon Martz, a vice president at vRide, which provides vanpool services in about 60 different urban areas in the country. “Why give people an incentive to commute in single occupancy cars? Give them a benefit of equal value for choosing to take public transportation, if they can do it.”
And there’s more good news. Congress made the change retroactive. It’s as if the higher limit of $240 had been in effect for transit riders all last year. The IRS already gave employers guidance on how to put that money back into their employees’ paychecks.
If you used this program last year and didn’t see an adjustment in your paycheck to cover the reimbursement, talk to your employer. If you haven’t been told about the higher limits for 2013 and want to put more aside, contact human resources.
Moving forward
The fiscal cliff deal only guaranteed an equal tax break for commuters who drive and those who take public transit for 2013. Those who support public transportation want this provision to be permanent.
“We need Congress to act to finally make the transit and the parking benefits equal so that all commuters are on a level playing field,” said Steven Higashide, a senior planner at the Tri-State Transportation Campaign, a non-profit watchdog group that serves New York, New Jersey and Connecticut. “This will create an incentive for transit riders and take more cars off the road.”
Frank Linkchorst, an aerospace engineer in California, agrees. He rides a vanpool weekdays from his home in El Segundo to work in Los Angeles 38 miles away. It’s cheaper and faster than being in a car.
“Anything that encourages people to rideshare is helpful,” he told me. “With 10 of us in that van, that’s nine fewer cars on the road at any given time – and that helps everybody.”
More Information:
- IRS Guidance: Application of Retroactive Increase in Excludible Transit Benefits
- TurboTax: America Avoids the Fiscal Cliff: This Could be Money in Your Pocket
Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.
Leave a Comment:
This is crazy. Public transportation is already subsided. I asked my local public transportation system. I asked them if thay broke even. The said yes. Then I asked them if it included the buses. They said no. That means it is a losing system of transportaton. The other vehicles pay the taxes so the buses can down the streets. Know telling what other funds from fuel taxes go to bus systems.
I live in a rural area where their isn't any public transportation. Why are they allowed a tax break? Fair is fair, right? I mean, I pay my fair share of taxes and I am lucky if I get my road plowed the same day as the snow flies. This is all I get from my taxes.
This is a good thing. Using public transportation should be incentivized. MORE of us should be using public transit, not LESS of us.
If you live in a rural area, you get far more than just snow plowing for your taxes. To suggest otherwise is hyperbole.
Rural Americans are the most subsidized people on this planet. From telephone cables, power lines, roads to postal services. It cost more money to provide power to some rural people than the power company will ever get back. Talk about socialism!
I live in a small town an hour away from a big "city" and we don't have public transportation. And the area is developed enough that it doesn't cost any more to provide power lines, roads and postal services to us than it does to people in the city.
Bibol, your car-heavy lifestyle is among the most subsidized thing in the world. Plus, for every person riding a train, drivers have more space on the roads.
Let's not forget that those who commute using public transit are ALSO paying taxes, which go to maintain the roadways, tolls, bridges, and tunnels that they are not using. We all pay; that's part of life. The Department of Transportation does not break even; all transit loses money. It's ridiculous to suggest otherwise. The only people making money from your ride to work are those who own oil fields, and the insurance companies.
yay, an intelligent response!
[Dick-2100935
Rural Americans are the most subsidized people on this planet. From telephone cables, power lines, roads to postal services. It cost more money to provide power to some rural people than the power company will ever get back. Talk about socialism!]
They may be subsidized, but it's so those people can produce the cheap (aka subsidized) food that you eat. Let's take away the subsidies and you can buy your food at true prices or produce your own.
Very few rural Americans produce the food that we eat, Go USA. The vast majority of our food comes from corporate farms. Actually, many inner-city and inner-ring suburban communities do produce their own food. Square foot gardening and community gardens are very popular.
@drowninggrover....yes lets give everything to everyone.
[Amused Muse
Very few rural Americans produce the food that we eat, Go USA. The vast majority of our food comes from corporate farms.]
Really? Where do you get your information? I grew up and still live in the Midwest and corporate farms are few and far between. Farms have become bigger due to the fact that grain/livestock prices have been too low to make a decent living on a small farm, but they're not corporate. The reason they're too low? To give the masses cheap food.
Small farms are not the major providers. I see, in Florida where I live, thousands of acres of cane and other crops, small farmers wouldn't even know how to find their way around these fields.
I'm not arguing about rural life though, if I were a farmer I'd starve to death.
Farmers aren't even a real thing! Don't you know that food comes from the store?? Yeesh!
My take on pubic transportation...I pay and they ride for free or at a discount...why are so many systems located in minority areas while the rest of us pay the bills?
I pay and they ride for free or at a discount
public transit is not free, and if they're claiming this tax credit, they necessarily will have paid MORE than they get back in public transit costs.
they're not in "minority areas," public transit is primarily in URBAN areas. It is used by minorities and wealthy folks alike, unless you think there are no stock traders in NYC that use the subway, or high-priced lobbyists and congressional staff in DC that use the subway, or lawyers and medical professionals in San Francisco that use Caltrain and the BART, etc., etc., ad infinitum...
Rick-- public transit is located in cities.... not minority areas. I'm white as can be and I ride public transit every single day. Secondly, it is far from free. But yes, it is less expensive than owning a car, maintaining that car, buying gas, paying insurance, etc. Rather than getting mad at those who ride transit, maybe think about how much happier you might be if you didn't have to pay for all that crap, and instead could buy a monthly pass and ride the train to work. We need more public transit available in this country.
Rick, the truth is, many minorities take advantage of public transit because they cannot afford cars. Public transit is built in cities.
If you want an example of something that was frequently built in "minority areas," look at our nation's highways. In many cases, these cut right through traditionally black neighborhoods that had homeowners, schools, and businesses. I-94 in St. Paul is one example - it devastated the Rondo Community.
So people that don't have access to PUBLIC transportation get the shaft! They don't mind using my tax $$$ to subsidize the system but I get NO benefits? As they are GOVERNMENT agencies I'am sure they are FULL of overpaid corrupt people. And most large cities with these issues are run by which political party??
how do you consider it "getting the shaft?"
If you live in an area without access to public transit, you probably DRIVE to work and therefore may get to claim THAT tax credit instead.
Bobby, I'm not sure you read the article. First of all, we ALL pay taxes and those taxes go to fixing roads whether or not we drive on them, so stop your whining. Secondly, the tax break for public transit is now EQUAL to the one you are currently getting.
You call it 'getting the shaft' when single driving commuters get the same benefit (and they got MORE for some time) than people who use mass transit get?? Your math is pretty funny. Let's give MORE to mass transit users, the same benefits to those who use carpools, since not everyone has mass transit available to them, but LESS to single drivers who do not have mass transit available to them.
The American tax code is really screwed up... Tax credits for this..., tax breaks for that... Reform the damn thing.
Reagan did. Remember?
What about those of us that ride a bicycle to and from work?
I actually would support a tax credit for that, but unfortunately it's very hard to prove you take a bike to work.
With public transit, there are receipts and transaction records that you can turn in to the IRS proving expenditure (you don't have to turn them in to claim it on your 1040, but you better have them if you get audited). You won't have these with bikes.
If they introduced a "bike to work" tax credit, it'd be claimed by half the population :)
It is not that hard at all to prove I ride a bike to and from work everyday, as I do not own a vehicle at all ^_~
Actually, you are able to get up to $20 a month in expenses reimbursed tax free from your employer if they offer the benefit package.
I live in Chicago and work in the loop. Anyone that lives in the city and drives into downtown Chicago is an idiot! I'm all for this tax break. It might be an incentive for more city dwellers to take public trans
That's funny!!!! You live in Chicago!! How's Rahm workin' out for ya!! I LOVE the Chicago values that won't permit a Chic-Fil-A, but endorses gangs, while taking guns away from law abiding citizens.
Did you vote for President Stinky (bo)? Twice? Three times?
Those who drive are subsidized beyond belief- from your cars to your gas to your roads, lights, stop signs, parking spots- everything is subsidized. And public transit is subsidized as well, no doubt about that. However--- public transit costs less than individual cars, uses less gas per person transported, takes up less space, moves more efficiently, emits less pollution, and is generally better for the environment.
To those who do not live near public transit; that's truly unfortunate. But you are still getting a tax break for driving- the only difference is now the tax breaks are EQUAL. You should encourage as many people as possible to use public transit, if only because getting more people out of cars and into trains means a better commute for drivers!
But then you'd have to be with people that ride the bus!! No thanks!!
I would really like to know what tax incentive there is in driving to work every workday?
I know that you can get a tax deduction for travel to and from a second job subject to 2% of your AGI.
The tax incentive they are talking about is taking money from your paycheck prior to taxing, just like the 401k/403b and your Health insurance, to pay for parking and paying for public transportation. But.... only if your employer offers the plan.
No one disagrees that public transportation if an option gives some great benefits. As on person mentioned it is already subsidized. I work or a company in the suburbs near Chicago and a group of about 10 20 somethings all got their coats on to find out that no one had a car, they had to take them all off and eat in. The cafeteria is as loud as a high school lunch room now. If people think they will get these breaks when enough people switch to riding they are drinking the green cool-aide. The classic bait and switch.
About time. If we were really smart we would use those gps things in cars to watch where everybody drives and tax or limit their driving. global warming is here and we are wrcking the air. the president should make an order that tells people when they can drive their car if they have to, otherwise they can like walk anything under 5 miles and only drive if they really need to be someplace important. or they can ride buses or solar electric trains. and nobody should be allowed to fly unlyess they fill out an application or something saying why they have to fly someplace and have it approved by the government first. i know the president is taking it one step at a time, but he really just needs to do a clean sweep on driving and flying and crack down now before it is too late.
United Nations' Agenda 21 slowly being implemented to the unaware sheeple.
A tax credit for driving to work because I live in a rural area, What planet do you live on?.
I pay for my gas, I Drive my car that I pay the upkeep on. 24 miles a day, THERE ARE NOT TAX CREDITS FOR THAT YOU MORON.............
As a past public transportation commissioner I can speak with some authority on this. Public transportation only collects about 17% of it operating budget from fares paid by ridders. The lionshare of the remaining 83% typically comes from sales tax revenues with the rest from grants, interest, advertising etc. Do the math: public transportation riders are getting nearly a free ride from the rest of us. More of them only makes the problem worse, not better. I my years as a commissioner I never knew any of the commissioners to have taken public transportation to a transit meeting. That says volumes.
With an attitude like that it's no wonder that most mass transit programs suck.
I live in the country and drive to work, I think it is unfair to keep giving tax breaks for what ever is in style that day.
we pay a lot to live away from the likes of many people that think it is cheaper to live in the country, they do not have a clue.......
if the tax code was fair-we would not need to keep tacking things on to it
the goverment has NO RIGHT to influnce the choice we make on where to live by giving people that do what the goverment wants a little reward
Maybe some of those people will use that money to offset the decrease in the allowable amount contributed to an FSA to help pay for StinkyCare.
BIBOL--too bad--public transit is better than driving, I love the train/subway. I feel anyone taking public transit should be afforded bigger tax breaks and driving into work when transit available--TAXED HIGH!. Subsidized-yes; irritating at times-yes; better method/way--NO!
What a minute !!
Parity?? What about telecommuters??
We use no energy, we produce no emission, we don't clog or wear down the highways or transit systems. There are benefits for people who drive and park, for people who ride share and for people who just ride. Why not those of us who make zero impact on the infrastructure ? Where is this .... parity ?
TELECOMMUTERS should be subsidized and rewarded for not being on the freeway in front of you !!!