Tax Breaks for Carpooling to Work

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Carpooling is one way to help the environment and increase your tax benefits. If your employer offers company-sponsored vanpooling, you can set aside pre-tax dollars through the payroll department to pay for part of the commuting fee. If you must pay to park your car at a designated vanpool stop, you can do it with pre-tax dollars.

Qualified Transportation Fringe Benefits

The Internal Revenue Service considers vanpooling and certain related commuter expenses an employee fringe benefit. The monthly limit the Internal Revenue Code permits employees under Section 132(f) for qualified transportation fringe benefits is based on cost-of-living increases and changes annually. As of 2014, that limit was $130. If you must park your car, that's another $250 per month, for a total of $380. Your employer also gets at least a 7.65 percent break on its employee payroll taxes.

Other Options

Your employer can also let you cash out your parking space tax break. Instead of the tax break, the permitted amount is added to your taxable salary. Your employer can also offer another transportation benefit -- tax-free-- in place of the parking tax break.