Jan 3, 2020

Understanding New Jersey’s pre-tax commuting credit

New Jersey employers with 20 or more employees must soon begin to offer their employees a pre-tax commuting tax credit. The law will take effect on either Sunday, March 1, 2020, or when the New Jersey Commission of Labor and Work Force Development issues the necessary regulations.

How it works

Eligible employees can now set aside a certain portion of pre-taxed wages that could be made available for specified transportation services. The amount set aside for transportation costs will reduce the employee’s federal taxable income. Commuters who know how much they spend each pay period on their commute can set aside those expenses and reduce their overall taxable income. 

Who is eligible

New Jersey employers with 20 or more employees must now give their employees the option to utilize this benefit. Federal government employees are excluded.

Eligible methods of transportation

Currently, the legislation provides for the benefit to apply to “commuter highway vehicle and transit benefits,” consistent with federal laws. The regulations will provide further clarity regarding how the benefit applies to vehicular and mass transit commuting methods.

Penalties for noncompliance

According to the legislation, there will be civil penalties for noncompliance by employers. The details of the penalties will be drafted and clarified through the regulation.

Further information

For further information on the legislation and the relevant laws, please see:

• Press release from Gov. Murphy’s office
• Statement from Gov. Murphy on the legislation
• S-1567
• I.R.S. Code permitting transportation as a pre-tax fringe benefit

 PIANJ will provide updates for members as the regulations get released for comment and final adoption.