Higher Gas Prices Lead to Greater Use of Mass Transit

Higher gas prices have fueled a significant increase in the use of public transportation, according to the American Public Transportation Association (APTA).

During the first 3 months of 2008, Americans took 2.6 billion trips on public transportation--an increase of 85 million compared to the same time period in 2007, according to the organization.

"There's no doubt that the high gas prices are motivating people to change their travel behavior," says William W. Millar, president of APTA. "More and more people have decided that taking public transportation is the quickest way to beat the high gas prices."

Employer incentives to use mass transit not only help lighten the burden of high gas prices, they also are good for the environment and beneficial to employees and employers from a tax standpoint. Under federal law, employers may exclude qualified transportation fringe benefits from an employee's wages--up to certain limits.

For 2008, employers can exclude up to $115 per month for combined commuter highway vehicle transportation and transit passes, according to IRS.

Employers also may offer employees the option of paying for up to $115 per month in commuting costs through pre-tax payroll deductions, APTA states in its brochure about the tax advantages of providing transit commuter benefits. "Alternatively, employers can share these costs with their workers by paying part of their monthly commuting costs and letting workers pay the balance using pre-tax dollars."

APTA points out that "employers can deduct their costs for providing such benefits." In addition, qualified transportation benefits are not subject to social security, Medicare, or federal unemployment taxes, according to the IRS.