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A recent report issued by the U.S. Census Bureau states that more women than men use public transportation to commute. Many women view riding a bus, train, or subway as a convenient way to travel to and from the workplace. It eliminates the stress of driving and provides an opportunity to scroll their phone or prepare for the day before arriving at their destination. Their cars experience less wear and tear, and the environment benefits from reduced emissions.
These trips, however, can put a dent in one's wallet. According to the Bureau of Transportation Statistics, one-way transit fare averages $1.63. While this may sound relatively low, consider that workers typically make two trips per day, five days a week. That adds up to more than $800 per year.
Depending on the region and the mode of transit, commuting expenses tally even higher. In Chicago, for instance, riding a train from the suburbs into the downtown area can cost between $4-$11 one-way based on the starting point.
Many women, however, know an effective way to save valuable dollars. They participate in their employer's commuter benefits program, which enables workers to pay for tokens, passes, and the like using pre-tax dollars. Here's how it works:
The IRS allows employers to operate programs where employees can elect to put aside some of their wages specifically for commuting costs. This money gets deducted from the worker's paycheck before calculating taxes. This action lowers the amount reported as taxable income, and enrollees pocket the tax savings.
At present, participating employees can elect to contribute up to $270 per month to their commuter benefits account. The IRS re-evaluates this figure periodically to adjust for inflation. HR departments typically keep company employees abreast of changes.
Women deciding whether or not to join should first understand that not every commuting-related expense is eligible. Other than certain parking fees, plans do not cover costs related to driving to work. Don't sign up with the impression that you'll receive reimbursement for gas or for repairing a tire that blew out on the way into the office.
While enrollees should check out the specifics of their organization's plan, covered commutes often include:
- Water taxi
- Ride-sharing (such UberPool)
Companies also vary in how they distribute benefits. Many methods are pretty convenient. For instance, a woman who wants a monthly train pass may be able to sign up to have one automatically paid for and sent to her house. Or, perhaps your employer maintains a supply of pre-loaded bus passes that you can buy from the business office with your funds.
Undoubtedly, most women want to know if they'll save money by using a pre-tax commuter benefits plan. The amount varies by circumstance. Someone with low transit expenses will not see as much savings as a commuter with hefty costs. Your tax bracket also affects the gain, as the savings of not paying tax on $270/month at the 22% rate amounts to more dollars than that same $270/month at the 15% level.
This commuter benefits plan calculator provides a quick estimate of savings by inputting your commuting expenses and your tax rate. On average, participating employees save $700 each year, according to the company Edenred Commuter Benefits.
Do all employers offer pre-tax commuter benefit plans?
No. Access to a plan depends on your individual employer and sometimes on where you live. Currently, only a few local and state jurisdictions require employers to offer commuter benefit programs. Areas with mandates include San Francisco and the Bay area; Berkeley, Los Angeles, and Richmond, Calif.; Seattle, Wash.; the state of New Jersey; New York City; and Washington, D.C. Concern over traffic congestion and climate change may lead other places to issue requirements in the near future.
As with all employer-offered benefits, individuals need to evaluate their own circumstance to determine whether or not to join an offered pre-tax commuter benefits plan. This action is especially necessary nowadays in light of the COVID-19 pandemic.
Commuter benefit plans bear a resemblance to the popular Flexible Spending Accounts (FSAs) used to cover health-related expenses with pre-tax dollars. Unlike an FSA, though, commuter benefit plans do not operate on a "use it or lose it" policy where set-aside money has a stated expiration date. Commuter funds generally can keep rolling over as long as you remain with the company. This news is great for employees aiming to stay put. But if you're planning on changing jobs soon, as many people are currently doing during The Great Resignation, you risk forfeiting to your employer anything left in the account when you depart.
Similarly, women should take a look at their commuting patterns. With remote work still part of the scenario at many companies, employees may not want to contribute as much (or at all) to a commuting fund.
Lastly, workers who participated in a commuter benefits plan prior to the pandemic and are now returning to the office should take a good look at their accounts. Many employees forgot to cancel automatic commuter-account contributions while working from home. When viewing their current balance, some discover a much higher figure than expected. Since plans are generally flexible, think about stopping or scaling back contributions in order to use up the accumulated sum first.