Commuter benefit laws

Some cities have started enforcing commuter benefit laws that help employees pay for their work commute. These laws allow employees to set aside pretax money to pay for their commutes, which reduces out-of-pocket costs. These laws help both you and your employee by reducing the tax liability associated with this employee’s payroll. You will save in payroll taxes and your employee will be able to lower their taxable income.

Cities with passed commuter benefit laws

  • San Francisco: San Francisco has had a commuter benefit law in place since 2009, which applies to companies operating in the city of San Francisco that have 20+ employees.  SF companies have the option to set up pretax commuter benefits, provide a 100% employer-paid benefit, or provide transportation (bus or van service). See the San Francisco Commuter Benefits Ordinance for more information.
  • New York City: Effective on January 1, 2016, New York City employers with 20+ full-time employees must offer those employees the option to use pretax income to pay for their commute. See the New York Commuter Benefits Ordinance for more information.
  • Washington DC: Similar to the San Francisco commuter benefit law, Washington DC has mandated that companies have the option to set up a pretax commuter benefit, provide a 100% employer-paid benefit, or provide transportation (bus or van service). See the District of Columbia Employer Transit Benefit Ordinance for more information.

This law applies to your company if you employ 20+ full-time, non-union employees who work in New York City, Washington DC, or San Francisco.  The pretax income must be used to pay for public or privately owned mass transit or in a commuter highway vehicle.

Commuter benefits and Gusto

Gusto can now help manage commuter benefits for you internally. If you have external commuter benefits you can add the benefit for payroll purposes and we'll deduct the employee's commuter benefit amount from their pay. We'll leave that money in your company's bank account to move externally.

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