Studies show that approximately 70% of Washington area workers drive to work by themselves. Every car needs a parking space and this can be a major expense for businesses though it’s often free to employees. Surface parking may run $2,000 per space per year, and underground garage parking can be more than $20,000 per space.
How Commuter Connections Can Help
Commuter Connections can help you evaluate your current parking policies and suggest ways to reduce or reallocate parking space to the benefit of your company, its employees, and its customers and clients. Our programs can help you increase your work force without increasing your facility costs. In some cases, Commuter Connections can work with you on zoning requirements for alternative parking proposals.
The Parking Connections
Those who have to drive to make a connection to public transportation may be eligible for the parking connections benefit. In recent years, residential growth and expansion has occurred away from the downtown urban areas, making it difficult to rely solely on mass transit. Commuters can enjoy tax-free incentives for driving when the automobile is a part of the commute trip and mass transit is used for the remainder of the trip. For instance, the eligible parking benefit may be up to $240 per month to pay for parking at a location from which employees commute by public transportation, such as a park and ride lot, transit station or facility or vanpool staging area. Employers can pay for the benefit and receive an equivalent deduction from business income taxes. Your employees will receive the benefit completely free of all Federal payroll and income taxes up to $240 limit. Eligible parking costs may be provided as a direct benefit, a pre-tax deduction, or as a shared expense. The same tax savings, reduced payroll costs and program flexibility apply to eligible parking expenses.
Cash out and Convert..
Many employers provide free or subsidized parking for employees, making it more economical for the employees to commute by automobile. The goal is to make it as economical for employees to use mass transit. If you only provide parking and your employees want to take advantage of public transportation and other alternatives, establishing a parking "cash out" program may be the appropriate choice. Your employees may forego parking and cash out the value of the parking benefit. The value of the parking benefit will be subject to taxes. However, if the value is converted to transit or eligible vanpool benefits, up to $245 of the amount converted will not be subject to taxes.
There is no real cost to employers, if they are leasing parking spaces for employees. They may simple transfer the cost for the parking space to a direct payment to employees. Should an employee decide to accept the cash value rather than a tax-free transit or vanpool benefit, the amount is treated, as additional compensation and they also would incur payroll and income taxes. If cash out value is greater than $245, employees could accept a tax-free transit or vanpool benefit and receive the balance in taxable salary. The employer will have to pay payroll taxes on the taxable portion of the cash out benefit provided. To offset that cost, simply lower the cash out amount by your share of the payroll taxes as follows
Cost of Parking Space $270
Payroll taxes (22)
Cash out Offer $248
The employees could apply the additional compensation towards costs associated with commuting modes that are not considered qualified transportation fringe benefits, such as walking, bicycling, carpooling, or rollerblading to work. Cash out provides an incentive for your employees to try other commuting alternatives. The tax status of employees who continue receiving the parking benefit would not be affected. For more information on Parking Cash-Out please Click here
Commuter Connections can work with you to set up alternate work schedules and teleworking programs that may greatly reduce or even eliminate the need for some parking spaces. Setting up ridesharing program such as carpooling or vanpooling can equally consolidate your parking requirements. And, we can show your ridesharing employees where the closest park-and-ride lots are throughout the metro area. Also, encouraging employees to use public transit whenever possible eliminates the need for expensive parking spaces. Most likely a combination of the above strategies will best work for your company.
If you’re interested in Commuter Connections employer services to help you investigate cost-effective parking management programs, use our easy Employer Services Request Form or call us at 1-800-745-RIDE.
Also, try our Commuter Connections bulletin board to participate in a discussion group on commuting issues.