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Commuter Choice Program Two Great Ways to Save
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  Commuter Choice Program
 

How Does Commuter Choice Maryland Work?

Your boss has three options for distributing MTA monthly passes or vouchers to you.  All three offer outstanding tax benefits for you and your employer.

Employer Supported Option

  • Each month your employer provides you up to $130 in tax-free commuter benefits in the form of a monthly pass or vouchers.
  • Your boss gives you a pass at no cost to you to ride MTA transit free all month.
  • The Internal Revenue Service (IRS) allows your employer to take a federal tax deduction as a regular business expense on the amount of benefit given to you.
  • The State of Maryland allows your employer to take a state tax deduction as a regular business expense on the amount of benefit given to you.
  • The State of Maryland also allows your company to claim a Maryland Commuter Tax Credit for 50% of the amount of benefit given to you up to a maximum credit of $50 per participating employee per month.

Example:

  • Employer pays for your MTA monthly pass
$68.00
  • Employer receives a Maryland Commuter Tax
    Credit for 50% of the amount of benefit provided 
(36.00)
  • Employer takes a federal tax deduction as a regular business expense1
(16.00)
  • Employer takes a state tax deduction as a regular business expense2
(5.28)
  • Net cost to the employer
$10.72
  • Net cost to the employee for a monthly pass
$0.00

1 Assume 25% federal corporate tax bracket for this example
2 Assume 8.25% state corporate tax for this example

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Employee Pre-Tax Salary Deduction Option

  • You purchase an MTA monthly pass at work and pay for it through a pre-tax salary deduction.
  • Your employer deducts the cost of your monthly pass either from the first paycheck prior to the month in which the pass will be valid or from the first two paychecks prior to the month in which the pass will be valid.
  • This pre-tax salary deduction subtracts the cost of your pass from your gross salary.  This reduces your taxable paycheck amount and saves you the federal, state and FICA taxes you would have paid on the amount deducted pre-tax.  These tax savings stay in your paycheck, thus lowering the amount that you actually pay for the pass.  In most cases, depending on your particular federal tax bracket, you will save approximately $20 - $25 per month or $240 - $300 per year.  This is on top of the savings you will realize by not driving to work.
  • According to AAA, the average cost per mile to drive a new car 15,000 miles per year is $.59.  If you drive 17 miles to work or 34 miles round trip, you are spending $20.06 per day to operate your car.  That adds up to $4,814 per year.  Compare that with $536 per year for your monthly transit pass.  The savings are incredible.

Example:

  • Employee pre-tax deduction from gross salary
$68.00
  • Federal tax saved (assume 15% federal bracket)
(9.60)
  • State tax saved (assume 7.5%)       
(4.80)
  • FICA tax saved (7.65%)       
(4.90)
  • Net cost to employee for monthly pass  
$48.70
  • Employer also receives FICA payroll tax savings
$4.90


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Combination Option

  • Your employer "shares" the cost of your monthly commute by transit or vanpool.
  • You pay for the remaining costs using a pre-tax salary deduction.
  • You ride transit all month for a fraction of the cost.
  • Your employer receives all the tax deductions and credits described in the first option

Example:

  • Employer pays $34.00 toward cost of $68 monthly pass 
$34.00
  • Employer receives a Maryland Commuter Tax
    Credit for 50% of the amount of benefit provided 
(17.00)
  • Employer takes a federal tax deduction as a regular business expense3
(8.00)
  • Employer takes a state tax deduction as a regular business expense4
(2.64)
  • Net cost to the employer
$6.36
  • Employee pays remaining balance with a pre-tax salary deduction
$34.00
  • Federal tax saved (assume 15% federal bracket)  
(4.80)
  • State tax saved (assume 7.5%)  
(2.40)
  • FICA tax saved (7.65%)    
(2.45)
  • Net cost to employee for monthly pass   
$24.35
  • Employer also receives FICA payroll tax savings
$2.45
   
   

3 Assume 25% federal corporate tax bracket for this example
4 Assume 8.25% state corporate tax for this example

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