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Taxing questions: Transit benefit changes take effect in 2011

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By Robert Thomson
Saturday, December 4, 2010; 5:07 PM

Transit riders, get out your calculators. Many commuters who take advantage of tax breaks or direct subsidies for usingMetro and other transit systems in the D.C. region need to look not only at how much they pay, but also at what share goes to riding or to parking.

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Two federal tax rules are scheduled to take effect in January. These rules involve the travel budgets for tens of thousands of commuters. The impact depends on how much of a benefit the rider gets now and how the rider uses the benefit.

We'll focus today on the basics of what's changing and what you need to do, but if you have additional questions - and many will - write to me at thomsonr@washpost.com. I'll address other issues in upcoming columns and on the Dr. Gridlock blog, at washingtonpost.com/drgridlock.

Transit benefit drops

What's a transit benefit?

Under IRS rules, commuters get tax breaks on transportation benefits provided by their employers. One allowable benefit is for commuter parking. Another is for transit use. Those two breaks go back several decades, although the limits have been increased and provisions modified.

What's changing?

The maximum amount of an employer-provided transit benefit that can be excluded from taxable income is scheduled to shrink from $230 per month to $120 on Jan. 1. The maximum for commuter parking will remain at $230 per month.

Why is it changing?

Under the 2009 federal stimulus law, the limit on the transit benefit temporarily rose from $120 to $230, to match the higher limit on the parking benefit. That provision is scheduled to expire at the end of this year. Transit advocates are urging Congress to extend the $230 limit for riders.


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