NYC passes tax-free transit benefits bill

New Yorkers already spend less money on transportation by driving less and using transit more—now more of them will get a tax break for commuting via transit. 

New York City Council unanimously approved expanding the program that allows commuters to use pre-tax dollars for transit. 

Transit benefits make riding the subway and bus more affordable by allowing workers to set aside up to $130 per month in pre-tax earnings to pay for public transit—just like people pay for health care or retirement contributions. But according to federal tax law, workers aren’t allowed to take the tax break if their employer doesn’t offer it as an option. The law will require all businesses with 20 or more employees to take part, expanding the benefit to 450,000 more New Yorkers.

According to an analysis by the Riders Alliance, the average worker in New York City making the median wage could save as much as $443 annually if he or she uses the transit benefit tax break. Multiplying those numbers gets a total potential tax savings for commuters of close to $200 million.

As a consultant in the 1980s, Richard Oram, now Chairman of the Oram foundation, helped design and launch New York's TransitChek program and popularized the program nationally by founding Commuter Check Corp. "For New Urbanism, this is important because, as the transit benefit requirement spreads outside New York, it will enable cities and towns to see alternatives to requiring the amount of parking now required at developments or in downtowns overall," Oram says. "The New York ordinance will underscore the role transit benefits have had as an alternative and offset to free parking."

This program has a small cost, yet it is popular with businesses because they realize a net savings, says Stuart Baker, vice president of business development for Edenred, one of many firms that offers transit benefit services for employers and their employees. "The employer saves on payroll taxes, because they don't pay on taxes set aside. The rest of us save because there is one less person on the road."

Edenred is a "third party administrator" that handles enrollment, administration, and customer service that enable employees in participating firms nationwide to take part. 

The Riders Alliance, a nonprofit advocate for transit in New York, estimates that businesses will save about $100 per year per employee. 

Baker adds: "The reason its important is that you create incentives to ride transit, you make it cheaper, get people out of cars, and you improve the environment."

Riders Alliance member Jeanmarie Theobalds says, “I work for a small company and we get transit benefits through our employer. For me, the savings make a difference. The money I save on transit helps me pay for health care and other necessities. I haven't always been offered the transit benefit, and now I'm fortunate to work for a company that provides it.  Everyone in New York City should have access to these savings. Thank you Council Member Garodnick [who sponsored the bill] and the council members who support employees who rely on public transit to get to work." 

Prior to New York City, San Francisco adopted a similar requirement.