Why Commuter Check is better than salary
Commuter Check is one of the easiest ways to save on taxes. It gives far more after-tax value to employees than a comparable amount of taxable salary or bonus. Employees save both income tax and FICA. Employers also save FICA plus disability, unemployment, workman's compensation and other payroll-linked costs. Usually, employees get 40% more in after-tax value as employers save 10% or more in payroll-related costs.

Assume the average employee earns $40,000 a year and wants to apply $480 a year ($40 a month) to transit. As salary, the take-home is far less than $480. A 33% combined Federal/State income tax bracket and FICA/Medicare deductions of 7.65% means the employee only receives $285. The 7.65% employer share of FICA/Medicare means the $480 actually costs the employer $517 to provide. Thus, from salary, the employee only gets $285 of the $517 it costs the employer - 45% is lost to taxes!

Other employer savings can also result. For example, pension, workers compensation, unemployment, disability or other payroll-linked costs may also be reduced. By using Commuter Check as part of compensation, everyone does better.

Click here for the 2007 Transit Benefits Tax Savings Worksheet.

Here’s another way to look at it: Giving a $20 Commuter Check each month instead of $240 of salary nets each employee $98 a year in added take-home, as the employer avoids $19 in FICA/ Medicare taxes per employee. At $40 a month in Commuter Checks, employee savings grow to $195 as the employer saves $38. At the $110 a month maximum, employees save over $500 while the employer saves $96.