Save on Taxes with Commuter Benefits

What are commuter benefits?

Commuter benefits are IRS-sanctioned, tax-free fringe benefits intended to lower employee’s commute costs. For 2026, the IRS tax code 132(f) allows companies to offer up to $340/month of tax-free commuter funds to each employee, either as an employer-paid subsidy or a pre-tax deduction from employees’ paychecks.  

This money can be used to cover the costs of commuting on public transit including light rail, buses, trains, ferries, and vanpools. 

Why do companies provide commuter benefits?

There are many advantages to providing commuter benefits for both businesses and workers. Even companies who aren’t affected by our city’s ordinance choose to provide commuter benefits to remain competitive. 

• Lower commute costs: Employees can save up to 30% on their commuting costs when using pre-tax dollars or up to 100% of commuting costs when receiving a subsidized ORCA Passport benefit.  

• Lower FICA taxes: Employers that offer pre-tax commuter benefits save an average of 7.65% on payroll taxes per participating employee.  

• Attract and retain talent: Affordability and benefits that improve overall quality of life is top of mind for today’s workforce. Combine an employer-subsidy with pre-tax payroll deductions to keep costs low and provide the ultimate lifestyle transit benefit: ORCA Passport.   

• Reduce parking demand: Incentivizing transit commutes with a pre-tax benefit reduces the demand for costly parking. 

• Meet greenhouse gas emission reduction goals: Seattle businesses and properties have ambitious ghg reduction goals. Pre-tax benefits incentivize mode-shift from driving alone to more sustainable options like vanpool and public transit. 

• Stay compliant: By providing pre-tax benefits, companies can meet compliance with Seattle’s Commuter Benefits Ordinance and Washington State’s Commute Trip Reduction Law 

Seattle’s Commuter Benefit Ordinance

The City of Seattle’s Commuter Benefit Ordinance went into effect on January 1, 2020. 

Most Seattle employers are required to offer their employees the opportunity to set aside income pre-tax to cover commuting expenses.  

The Commuter Benefit Ordinance applies to companies who:

• • Have 20 or more employees worldwide.
  • Have one or more employees based in Seattle who work at least 10 hours per week.
  • Operate as for-profit entities. Tax-exempt not-for-profit organizations and government agencies are exempt.

Learn more about the ordinance from the Office of Labor Standards. 

Affected companies can comply by offering one of the following: 

1. 1. Employee-paid, pre-tax benefit: Allow employees to set aside up to the maximum IRS limit per month on a pre-tax basis. Employee participation is optional. Many businesses facilitate this benefit at no-cost in-house through the ORCA Business Choice program. Third-party vendors are another option and can lower administration time.  
   2. Employer-paid subsidy: Provide a tax-free subsidy up to $340/month per employee for transit or vanpool use. ORCA Business Passport is the easiest, most popular option for Seattle businesses to provide a transit subsidy. 
   3. Cost-share: Combination of employer-paid subsidy and employee-paid pre-tax deduction 

How Commute Seattle can help

Need help navigating your options? Commute Seattle can help you meet compliance and choose the best option for your workplace needs. We provide complementary support to businesses through one-on-one consultations. Schedule a call to talk to a specialist or email us at orca@commuteseattle.com.