*Assumes the maximum incremental transit expense for 2015 ($120) at a tax rate of 30%.
In a last minute legislative move, commuters of mass transit receive a $432+* year-end bonus. On December 18, 2015, President Obama signed the Protecting Americans from Tax Hikes Act of 2015 (PATH) into law which included a permanent extension of pre-tax mass transit parity with parking limits. Pre-tax mass transit limits will be permanently set equal to the pre-tax parking benefit limits.
The change is retroactive for 2015. As a result, the allowable pre-tax mass transit limit for 2015 increased from $130 to $250 per month. The monthly mass transit limits for 2016 will also increase to $255 per month.
In order to take advantage of the retroactive increase for 2015, participants would have needed to elect the full cost of their transit expense. Any amounts taken as a post-tax deduction can be reclassified as pre-tax up to the new limit of $250 per month for 2015 (a difference of $120 per month). Clients from Benefit Resource will receive a more detailed communication regarding options for taking advantage of the retroactive increase.
For 2016, pre-tax mass transit election limits automatically increase to $255 per month. If participants were not previously electing the full cost of their transit expense, they should consider increasing their election to take advantage of the additional pre-tax transit benefit.
With commuting expenses on the rise across the country, this permanent change provides an added bonus for working Americans and greater certainty for years to come.