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Federal Mass Transit Benefit That Expired At End of 2011 Covered Up To $230 Worth of Monthly Commuting Costs, But Has Now Dropped To $125; NY Commuters Saved Over $200 Million Last Year Through Benefit

Schumer Announces Major Push To Make Tax Benefit Permanent & Retroactive To Cover Losses At Beginning of 2012 For Metro-North, Subway & Bus Commuters

Schumer: As Costs Continue to Rise and Services Continue to Be Cut, Now More Than Ever Metro-North Riders Deserve This Benefit

Today at the Hastings-on-Hudson train station, U.S. Senator Charles E. Schumer announced a major effort to extend the federal mass transit tax break that previously saved mass transit riders nearly $1,400 per year in pre-tax commuting benefits that expired at the end of the year. Up until December 31, 2011, the commuter benefit covered up to $230 per month from a person’s gross income to pay for their mass transit commutes and provides parity with a previous benefit extended to drivers’ parking costs. In 2009 the mass transit benefit was almost doubled from $120 per month to $230 per month, and would have been increased to $240 for 2012, creating a savings of over $1,300 per year for commuters. Currently, 500,000 commuters in the Greater New York Metropolitan Area, and 2.7 million commuters nationwide take advantage of the benefit. Schumer is pushing to make the transit benefit permanent and on par with the benefit extended to drivers, and will also push to extend the tax benefit retroactively to cover the beginning of 2012, so that commuters do not lose out on savings between the expiration of the benefit and the time when it is reinstated.

“The last thing we should be doing in this economy is making it more expensive for New Yorkers to get to work,” said Schumer. “Increasing fares and decreasing incomes mean we need to help stretch every dollar earned by New Yorkers and that includes keeping programs that reduce commuting costs in place. The fact that this transit tax credit expired as the clock struck twelve on New Years is unacceptable, and I’m going to do everything I can to see the full extension of these commuting benefits.”

Until the December 31, 2011 expiration of the federal mass transit tax break, employees whose monthly mass transit fees were less than the $230 cap could deduct their commuter costs from their paycheck, on a tax free basis. In many cases, employers assumed the full, tax-free cost. The measure also helped employers save money by lowering their payroll taxes compared to if they paid the money in wages. The expiration of these benefits dropped the break for commuters to $125 per month in 2012. Schumer stated that in combination with skyrocketing transportation costs, it is essential the mass transit tax benefit be extended and then implemented retroactively to cover lost benefits in the beginning of this year. Schumer is pushing to create parity between the mass transit benefit and parking benefit, and would peg the mass transit benefit to the same rate in 2012, increasing it to $240 if extended.

Schumer authored legislation that passed as part of the economic stimulus package in 2008, allowing employers to offer their employees up to $230 per month in transit benefits tax free, equal to what they were offering tax-free for parking costs. The transit benefit reduces a commuter’s transportation costs by a third or more. With the tax break reduction from what would have been $240 this year to $125, Schumer noted a greater incentive for people to drive to work rather than take mass transit, as the $240 pre-tax savings would only apply to those who drive. Schumer is pushing to extend the provision permanently and to extend the tax benefit retroactively for benefits missed in early 2012.

This monthly mass transit tax break would total $240 for 2012, which would cover a larger portion of Metro-North’s monthly commuting costs. Schumer noted that the cost to ride Metro-North from Hastings and White Plains to Grand Central Station is a flat rate of $229 monthly and from Cold Spring to NYC is approximately $360 per month. Without this extension, less than half of the monthly cost for residents would be covered.  Without an extension of the benefit, a commuter from White Plains loses over $100 in pre-tax benefits a month, after taxes costing the commuter up to approximately $1,400 a year. Schumer stated that during difficult economic times, these rates demonstrate Hudson Valley residents’ need for this commuter benefit to be extended.

The extension of this benefit would also fully cover the monthly cost of riding all major mass transit systems in New York City, including subway, bus, and express bus. If extended, the mass transit benefit would cover the full $104 per month cost of an Unlimited 30-day MetroCard for NYC railways and buses. The mass transit benefit would also fully cover the monthly cost of buying a weekly pass on MTA express bus at $50 a week, for a total monthly cost of $200. With the benefits expiration and drop to $125 per month, only 58 percent of those costs will be covered.

Besides providing relief to commuters who already use the benefit, extending and making the federal mass transit tax break permanent would provide relief to those who have come to rely on the pre-tax savings as well to continue incentivizing the use of mass transit.  

According to TransitCenter, in the New York metro area, commuters saved over $200 million in 2011 because of the transit benefit and employers have saved over $45 million since the benefit went into effect in the New York area. Approximately 15,000 companies in New York offer the transit benefit covering more than a half a million employees. And in 2010, employers nationwide saved about $300 million in payroll taxes, money that can be reinvested to create jobs.


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