WASHINGTON — To the many items that Congress neglected to address before wrapping up its year, add another: tax benefits for millions of Americans who rely on mass transit for their commutes.
Starting Jan. 1, the monthly amount that commuters can set aside before taxes to spend on mass transit is to drop from $245 to $130, which for some heavy users could mean several hundred in higher costs next year.
The change pits mass-transit users against drivers, who by contrast will see an increase in their monthly parking benefit in the new year, from $245 to $250.
“This is the biggest disparity between the two components of the commuter benefit that we have ever seen,” said Natasha Rankin, executive director of the Employers Council on Flexible Compensation. “For those who rely on mass transit, where you also have increasing costs, this is a double hit.”
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Advocates say the mass-transit benefit enjoys broad, bipartisan support. But it’s attached to a larger bill filled with seemingly random tax benefits that have expired or are set to be phased out at the end of the year. These so-called extenders include everything from research-and-development tax credits to breaks for domestic TV and movie production.
With lawmakers saying they’ll pick up the extenders bill in the first quarter of next year, advocates and industry observers say it could take months for transit users to see benefits restored to the current level.
“Unfortunately, many people will lose not only the January, February and March tax break but probably into April, too,” said Dan Neuburger, president of commuter services at WageWorks, which helps companies administer benefits. Even if Congress addresses this by March, as hoped, it will take weeks to administer the benefits, Neuberger added. That means most commuters may not see the higher tax break until later in the spring.
Employers, who must elect to participate in the commuter program for their workers to benefit, also stand to lose money. That’s because if employees are unable to deduct as much from their paychecks as before, their employers have to pay more in payroll taxes.
The tax benefit for commuters has been in place since 1998. From the beginning, those who used mass transit saw lower benefits than those who drove and parked. Regular cost-of-living adjustments only widened the gap until 2009, when the economic-stimulus package brought the transit benefit temporarily in line with the one for drivers.
In 2012, however, that parity lapsed, and the transit cap fell to $125 a month. On Jan. 1, 2013, in its resolution to stave off the fiscal cliff, Congress brought the amount back up to $245 and retroactively tried to patch up the savings that were lost the previous year.
Advocates of the tax break say that calculating those retroactive savings — a situation Congress will once again face if it restores the bigger commuter-tax break next year — can be difficult.
“It’s a huge administrative burden to then go figure out retroactively what someone’s commute would’ve cost,” said Neuburger, of WageWorks. “So companies just didn’t want to do it. They lost the tax savings, and the employees lost the tax savings.”