What is the 2026 qualified transportation fringe limit?

$340 per month for transit passes / vanpooling AND $340 per month for qualified parking (Rev. Proc. 2025-32). The two limits are separate — an employee can receive both simultaneously, for up to $680 per month combined.

Is the benefit pre-tax for the employee?

Yes. Up to $340/month of transit and $340/month of parking is excluded from the employee's wages for federal income, FICA, and FUTA. Value above the limits, minus anything the employee paid for the benefit with after-tax money, is taxable wages. The exclusion is for current employees (including corporate officers) and for leased employees who have worked for the employer substantially full-time for at least a year under its primary direction or control. A more-than-2% S-corporation shareholder is treated like a partner for fringe benefits, so transit or parking the S corporation provides is taxable wages to them; partners and sole proprietors can't use the exclusion either (IRC §§132(f)(5)(E), 1372; Pub. 15-B).

Can employers deduct the cost?

Generally no, for tax years after 2017. The TCJA disallowed the employer deduction for qualified transportation fringe benefits (§274(a)(4)), and OBBBA did not restore it. The benefit remains tax-free to the employee but is now an after-tax cost to the employer. (The employee-safety exception in §274(l) covers other commuting reimbursements, not qualified transportation fringes.)

What is a 'qualified parking' expense?

Parking provided to an employee on or near the employer's business premises, or on or near a location from which the employee commutes to work (including park-and-ride). Residential parking near the employee's home does NOT qualify.

Does bicycle commuting still count?

No. The TCJA suspended the exclusion for qualified bicycle commuting reimbursements for 2018 through 2025, and the One Big Beautiful Bill Act (P.L. 119-21, §70112) then repealed it permanently for tax years beginning after December 31, 2025. Bicycle reimbursements paid in 2026 are taxable wages.

Updated August 24, 2026Reviewed for 2026 tax yearIRS-sourced

Tax Year 2026 · Pre-Tax Commuter Benefits

2026 Qualified Transportation Fringe Benefits

$340/month for transit + $340/month for parking — pre-tax to employees (not to more-than-2% S-corp owners), but not deductible for employers.

Commuter benefits remain one of the highest-utilization pre-tax fringe benefits. This guide reflects the 2026 inflation adjustments from Rev. Proc. 2025-32 and the post-TCJA employer deduction rules unchanged by OBBBA.

$4,080

annual transit limit per employee in 2026

About Our Editorial Process

What are the 2026 commuter benefit limits?

For 2026, employees can receive up to $340 per month in pre-tax transit/vanpool benefits AND up to $340 per month in pre-tax parking — a combined $680 per month (not available to more-than-2% S-corp shareholders, partners or sole proprietors).

•Transit / vanpool: $340/mo
•Qualified parking: $340/mo
•Annual max (combined): $8,160
•Employer deduction disallowed since 2018 (TCJA §274(a)(4), unchanged by OBBBA)
•Not for >2% S-corp shareholders, partners or sole proprietors (§1372; §132(f)(5)(E))

Ask Taxly about your benefit plan

Transportation fringe benefits are one of the cleanest tax-free comp arrangements still standing after TCJA. Employers can provide them directly (free or subsidized parking, transit passes) or let employees pay for them pre-tax through a compensation-reduction election — and most employees never opt in to that election because HR doesn't surface it clearly.

Real-world scenario

NYC commuter elects $340/mo transit fringe in 2026

2026 monthly transit cap (Rev. Proc. 2025-32): $340. Annual pre-tax election: $4,080. At a 32% combined federal+state+FICA marginal rate: ~$1,300 in real take-home savings vs. paying the same fare with after-tax dollars. No itemizing, no Schedule A, no separate filing — just a payroll election.

The part most people miss

Employer-side: TCJA eliminated the employer's ability to deduct the cost of providing transit benefits (still a no-deduction zone for the company). Many employers quietly stopped offering the benefit because they no longer get the deduction — but employees can still elect pre-tax if HR keeps the plan in place. Ask. Most employees who would qualify aren't enrolled because no one offered.

2026 Limits at a Glance

Monthly transit / vanpool$340

Monthly qualified parking$340

Combined monthly max$680

Annual transit only$4,080

Annual combined$8,160

Employee pre-taxFederal income, FICA, FUTA

Employer deductionDisallowed (TCJA §274(a)(4))

AuthorityIRC §132(f) / Pub. 15-B

Sample Employee Savings (2026)

An employee in the 24% federal bracket whose wages stay under the 2026 Social Security wage base ($184,500) and who maxes out both benefits saves roughly:

Annual pre-tax benefit$8,160

Federal income tax saved (24%)$1,958

FICA saved (7.65%, wages under $184,500)$624

Total annual tax savings~$2,583

Above the wage base the FICA saving shrinks. If your wages are still over $184,500 after the election, only the 1.45% Medicare tax is saved ($118 on $8,160), or 2.35% ($192) if your wages after the election are also over the Additional Medicare Tax threshold ($200,000 single, $250,000 of combined wages married filing jointly). With wages between $184,500 and $192,660 before the election, the 6.2% Social Security part is saved only on the dollars that fall under the base.

If you file jointly and your combined wages stay above $250,000 after the election, you also save the 0.9% Additional Medicare Tax ($73.44) — on top of the total above, even when your own wages are under the Social Security wage base.

State income tax savings (where applicable) come on top.

Frequently Asked Questions

Source documents

Setting up commuter benefits for 2026?

Ask Taxly about employee elections, payroll mechanics, and the employer deduction limitations — all in plain English.

Sources & References

Primary references used for this content

IRC §132(f)

Qualified transportation fringe

Monthly transit and parking exclusion limits

View on law.cornell.edu

Rev. Proc. 2025-32

2026 Inflation Adjustments

Official 2026 brackets, deductions, and thresholds

View on irs.gov

✓2 primary sources; links re-checked on a weekly rotation by the source watcher