There is no such thing as “free parking”.
And now there is an IRS rule that has not been relevant to most employers until recently.
With the continuous rising costs of parking in downtown, many employers who pay for all or part of employee parking need to be aware of the tax requirements. Parking at work is a fringe benefit for employees–even if they don’t view it that way. As such, the value of the parking is treated as compensation, unless a specific tax law exclusion applies. The tax law does provide an exclusion for qualified transportation fringe benefits, including “qualified parking” (Code Sec. 132(f)(1)).
Qualified parking is parking provided by an employer on or near the business premises of the employer. Parking is treated “as provided by an employer” if 1) it is provided on property the employer owns or leases, 2) the employer pays for parking at another location, or 3) the employer reimburses the employee for parking.
The exclusion for qualified parking is not unlimited. The maximum amount that can be excluded from an employee’s income is $250 per month (Rev. Proc. 2013-35, 2013-5 I.R.B. 537). If you are paying over $250 per month for employee parking then you are required to allocate the amount over the $250 to your employee as income.
For more information, give us a call!
B2 IS GROWING!
We are excited to move into our new office space…please note our new suite number:
1601 Rio Grande, Suite 450, Austin, TX 78701
We are here to help…
B2 has been assisting law firms and small businesses with their day-to-day accounting, billing, human resource and overall office management for over 7 years.
It’s what we know. Call us.