THE TCJA AND COMMUTING BENEFITS DEDUCTION

The Tax Cuts and Job Acts (TCJA) signed into law on December 22, 2017 provides that beginning January 1, 2018, no deduction is allowed for the expense of a qualified transportation fringe benefit provided to an employee of the taxpayer such as employee parking or transit passes. It is possible to use a salary reduction arrangement (SRA) so the employee could have a choice between the actual receipt of compensation and the provision of a benefit. In other words, if an employee earned $3,500 monthly compensation and incurred $150 a month for parking the employee could either (1) receive the entire $3,650 or; (2) reduce the salary to $3,500 and take the employer-provided parking benefit on a pre-tax basis, much like a 401(k) deferral.

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