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![handle is hein.taxfoundation/ffdejxz0001 and id is 1 raw text is: FUDTOFiscal Fact
January 7, 2013
No. 349
Income Tax Code No Longer Favors
Parking over Transit...For Now
By
Joseph Henchman
On January 3, President Obama signed the American Taxpayer Relief Act into law, averting much of the
fiscal cliff of higher taxes and expiring provisions.' About 56 pages of the 157-page bill consisted of the tax
extenders, a grab bag of provisions that regularly expire and are regularly renewed by Congress.2
A higher tax-free monthly transit benefit is one of these provisions. Section 132(o of the Internal Revenue
Code establishes a qualified transportation fringe, excluding from tax any income (up to a cap) paid by the
employer for the employee's parking, transit passes, commuter vehicles, or bicycle commuting expenses. An
employee may take any or all of the amounts, which are then withheld from his or her paycheck. Until
2009, the monthly parking cap was roughly twice the monthly transit pass cap, with both growing as the
amounts were annually adjusted for inflation (see Table 1).
The 2009 stimulus bill eliminated this disparity, equalizing tax treatment of parking and transit commuting
expenses at $230 per month each. (A new $20 per month bicycle commuting expense reimbursement
provision was added for 2009 as part of a 2008 bill.) The parity between parking and transit was a
temporary provision, however, running only from March 1, 2009 to December 31, 2010.3 Congress
subsequently extended it through the end of 2011, when it finally expired. Throughout 2012, therefore,
commuters could exempt $240 in parking benefits per month, but only $125 in transit benefits per month.
The 2013 law restores parity between parking and transit, at $240 per month. However, there are two
wrinkles in this law.
1 Se Joseph Henchman, Details of the Fiscal Cliff Tax Deal, TAX FOUNDATION TAX POLICY BLOG, Jan. 1, 2013,
hj:;!Ln.!// a d oatotogi .Aogdec tils-fibtal-cliff-tax-deal.
2 See, e.g., Tim Carney, How the corporate tax credits got in the 'chI deal, WASHINGTON EXAMINER (Jan. 2, 2013) (explaining that
the provisions were pasted from a Senate bill marked up in July 2012), htp:i/washingtonexaiiiner.com/timr-carne-how-
corporate- 1ax-credits-got- -the-ci--ea',/art'cle/251739/# .UOW'InA AdSE.
3 See Joseph Henchman, Income Tax Code No Longer Favors Parking Over Transit, TAX FOUNDATION TAX POLICY BLOG, Mar. 3,
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