Introduction
In order to maximize your Commuter Benefits elections, it is helpful to understand how your benefits are being treated from a tax perspective. Luum makes it easy to understand the taxability of your elections during the election process, but additional information is included in this article.
Defining the Terms
In order to maximize your benefit, it's helpful to understand the following terms:
- Pre-tax contribution: A commuter benefits election for which the contribution amount is made before taxes are deducted.
- Employer subsidy: Employer-provided money that may be contributed to your commuter benefits election.
- Employee contribution: Money contributed from your earnings to be used toward your commuter benefits election.
- Taxable contribution: Any contribution amount above the monthly pre-tax contribution limit.
- Non-taxable contribution: Any contribution amount up to the monthly pre-tax contribution limit.
- Pre-tax contribution limit: The monthly per-employee limit for pre-tax contribution from all sources toward commuter benefits, as regulated by the tax code. At this time, the federal monthly pre-tax contribution limit is $300.
Maximizing Your Pre-Tax Benefit
Your Commuter Benefits program is designed to provide the most flexible options that help you maximize your pre-tax contribution. During the benefit elections process, you will see how these benefits are processed from a tax perspective as you make selections. In general, the following simple formula is recommended to help you maximize your pre-tax contribution.
For additional clarification, refer to the following examples.
Example 1:
- Estimated Monthly Commuting Cost: $200
- Employer-Provided Subsidy Amount: $50
- Recommended Pre-Tax Contribution Amount: $150
- Total Election Amount: $200
- Out-of-pocket expenses: $0
Example 2:
- Estimated Monthly Commuting Cost: $350
- Employer-Provided Subsidy Amount: $50
- Recommended Pre-Tax Contribution Amount: $300(pre-tax contribution limit)
- Total Election Amount: $350
- Out-of-pocket expenses: $20