Today, U.S. Senator Charles E. Schumer announced that the federal mass transit tax break, which currently saves mass transit riders over $1,000 per year, will be extended by the Senate through 2011.
The commuter benefit covers up to $230 per month from a person’s gross income to pay for their mass transit commutes, which is an increase from the $120 benefit that was in place until 2009. Without the extension, the benefit was set to revert back to $120 per month and would have resulted in a greater benefit to commuters who drove to work. Employees whose monthly mass transit fees are less than $230 can deduct the full amount from their paychecks, tax free, through an employer benefit program. Schumer plans to continue his push to make the $230 transit benefit permanent. The measure is included in the tax bill compromise that passed the Senate in a cloture vote yesterday.
“This is a major victory for mass transit riders in New York and will ensure that come January 1, 2011, commuters won’t be facing even more commuting costs than they currently do,” said Schumer. “With increased fares and reduced services we need to maintain incentives for middle class New Yorkers so they don’t have to break the bank when commuting to and from work.”
Schumer authored the original legislation that passed as part of the economic stimulus package, allowing employers to offer their employees up to $230 per month in transit benefits tax free, equal to what they were offering tax-free for parking costs. The transit benefit reduces a commuter’s transportation costs by a third or more. If allowed to expire there would be a greater incentive for people to drive to work rather than take mass transit, as the $230 pre-tax savings would still apply to those who drive. Schumer noted the $230 per month benefit will fully cover the monthly cost of riding all major mass transit systems in the city – subway, bus, express bus, and will cover most of Metro North and LIRR commuting costs.
“With over a third of companies across the country offering the benefit, accounting for 52% of employees, the Senate’s passage of the extension is clear indication that the transit commuter benefit offers real savings to commuters and employers nationwide and is an effective means of rewarding commuters who make the environmentally sound choice of taking public transportation to work,” said Daniel M. Neuburger, President and CEO of TransitCenter, Inc. “The goal now is to look beyond 2011 and make the new transit cap and parity with parking benefits, a permanent fixture of Internal Revenue Code Section 132(f) which governs commuter tax benefits.”
Schumer also said that the New Yorkers who benefit the most from the transit benefit are people who commute from the outer boroughs, Long Island and Westchester. Under the old cap of $120 per month, only a small portion of the total monthly cost of commuting on the ExpressBus, LIRR and MetroNorth was fully covered.
NYC Bus and Subway – The mass transit benefit covers the full $104 per month cost of an Unlimited 30-day MetroCard.
Express Bus – The mass transit benefit fully covers the monthly cost of buying a weekly pass on MTA express bus, which costs $50 a week. Under the old benefit, only 60 percent of the cost would be covered.
LIRR – The mass transit benefit now nearly fully covers the typical monthly pass from the most common commuting areas. For example, a monthly ticket from Garden City to Penn Station, which now costs $233, would only be 51 percent covered by the old mass transit benefit. Without an extension of the benefit, a commuter from Garden City loses $110 in pre-tax benefits.
MetroNorth – The mass transit benefit now nearly fully covers the typical monthly pass for most MetroNorth riders. For example, a monthly ticket from White Plains to Grand Central Terminal, which as of December 30,, 2010 is $229, would only cover 52% under the old benefit. With the extension of the benefit through 2011, the entire cost is covered.