Commuter Tax Benefits and ORCA Business Programs
In today's competitive job market, providing commuter benefits can help attract and retain employees. It is also an opportunity for both employees and employers to save on taxes while supporting sustainable transit options.
This page highlights some information related to taxes and ORCA for Business. For comprehensive information tailored to your organization‘s needs, consult with a tax specialist.
IRS benefits
Employers and employees can save on federal taxes by offering benefits like ORCA Business Programs. With the ability to spend up to $315 per month in pre-tax dollars on public transportation, employees benefit and employers can avoid FICA tax on those salary dollars. This results in a valuable employment perk that promotes public transportation and provides savings for both parties.
IRS Employer‘s Tax Guide to Fringe Benefits
Washington State tax credit
Washington State offers tax credits to employers and property managers providing commute trip reduction incentives. These credits apply to business and occupation (B&O) tax or public utility tax (PUT) liability.
Eligible mode incentives include ride sharing, public transportation, car sharing, and non-motorized commuting, with credits reaching 50% of the incentive payment, capped at $60 per employee per year. Employers or property managers can receive up to $100,000 in credit per fiscal year.
Employers seeking the Washington State tax credit must submit their application to the Department of Revenue between the timeframe of Jan. 1 to Jan. 31 of the subsequent year following the provision of commute trip reduction payments.
Washington State Department of Revenue Tax Incentive Program
Seattle-based employers
Seattle-based employers with 20 or more employees must comply with the Commuter Benefits Ordinance . This ordinance mandates that employers offer pre-tax deductions for transit or Vanpool expenses, or provide a transit pass subsidized by the employer. This initiative serves multiple purposes: it reduces carbon emissions and traffic congestion while also providing cost savings for both employers and employees.
FICA tax
The Federal Insurance Contribution Act (FICA) imposes a 15.3% tax rate (2024) funding Social Security and Medicare. Employers cover half through a 7.65% payroll tax, and employees contribute the remaining 7.65%. Offering a transportation fringe benefit allows the deduction of its value from both the employer and employee sides, impacting the FICA tax calculation positively.
Khan Academy: Explaining the FICA Tax Law
Social Security & Medicare Withholding Rates