Is My Parking Free? QTF Parking Benefits Under the TCJA
posted Feb 18, 2019 by Mitchell S. Halpern, JD, AEP® in the Global Tax Blog
Attention employers: Do you provide parking for your employees? The Tax Cuts and Jobs Act (TCJA) disallows a tax deduction for qualified transportation fringe benefits (QTFs). Learn more about how this might impact your business.
What are Qualified Transportation Fringe Benefits (QTFs)?
Under Section 132(f) qualified transportation fringe benefits include:
- Transportation in a commuter highway vehicle between an employee’s residence and place of employment
- Any transit pass
- Qualified parking- parking provided to an employee on/near the business premises of the employer or on/near a location from which an employee commutes to work.
Prior to 2018, under Sec. 274(a)(4), QTFs provided by an employer to an employee were excludable from the employee’s gross income (up to certain limits mentioned below). Additionally, employers were allowed a deduction for salaries and compensation, which included the QTF benefit cost.
What has changed?
The TCJA amended Sec. 274(a)(4) to provide that expenses paid or incurred by employers after December 31, 2017 to provide employee parking are (generally) no longer deductible. The amount of QTFs is still excludible from the employee’s gross income in an amount up to $265 (up from $260 per month in 2018).
Regardless of the method used by the employer to provide parking benefits (allowing employees to park in an employer owned or leased parking facility, third party garage or lot, or reimbursing workers for parking expenses they incur), the new rules disallow an employer’s deduction for expenses paid or incurred.
Some things to note:
- Notice 2018-99 requires employers to determine the total parking expenses paid or incurred to provide the parking benefits (not the value of the parking provided to employees).
- If parking expenses amount to more than $265 per month per employee, the excess needs to be included in the employee’s income and would be deductible as wages.
- Parking expenses include, but are not limited to repairs, utility costs, maintenance, property taxes, insurance, interest, snow/ice removal, trach removal, cleaning, landscape costs, parking lot attendant expenses, and security.
- Make note that depreciation is not considered a parking expense
The IRS is requesting comments on the Notice 2018-99 by February 22, 2019. Questions? Please reach out to us.
The TCJA…So Many Changes, So Many Questions…we can help you navigate this huge tax overhaul! Visit our Tax Reform Center for everything you and your business need to know, now.