Commuter Benefits for Employers: 2026 Pre-Tax Transit and Parking Limits

The IRS raised the 2026 monthly pre-tax commuter benefit limit to $340 for transit and $340 for parking. Here is how Section 132 commuter benefits work, how they differ from a Section 125 plan, and which employers are required to offer them.

Quick Answer (as of 2026): A commuter benefit lets employees pay for transit passes, vanpool fares, or parking with pre-tax payroll dollars under Internal Revenue Code Section 132(f). The IRS raised the monthly limit to $340 for transit and $340 for parking for 2026, up from $325 in 2025. Employers save 7.65% in FICA on every dollar employees elect, the same way they do on a Section 125 election, but commuter benefits run under a separate code section with its own rules.

A commuter benefit is one of the few pre-tax payroll options that is not a Section 125 cafeteria plan at all, and mixing the two up is the most common mistake employers make when they set one up. Commuter benefits sit under a different part of the tax code, Section 132(f), with their own monthly dollar limit and their own eligibility rules. The IRS just raised that limit for 2026, which makes this a good time for any employer near a transit line to check whether their payroll platform is configured correctly.

What Is a Section 132 Commuter Benefit?

A Section 132 commuter benefit is a pre-tax payroll deduction that pays for an employee's transit pass, vanpool ride, or qualified parking near work. Internal Revenue Code Section 132(f) lets an employer offer this benefit through employee salary reduction, a direct employer subsidy, or a combination of both, according to the Internal Revenue Service.

Unlike a Section 125 cafeteria plan, a commuter benefit does not require a written plan document, a plan year, or nondiscrimination testing. An employer can start or stop it, or change the monthly limit it offers, without the compliance overhead a cafeteria plan carries. That flexibility is also why it is easy to assume commuter benefits and Section 125 benefits are the same kind of program. They are not.

How Much Can Employees Contribute Pre-Tax in 2026?

The 2026 monthly limit is $340 for transit and vanpool combined, and a separate $340 for qualified parking, according to Revenue Procedure 2025-32 released by the Internal Revenue Service. Both limits rose from $325 in 2025. An employee who both takes the train and pays for parking at the station can use both benefits at once, for a combined $680 a month in pre-tax payroll deductions, since transit and parking are tracked as two separate limits rather than one shared cap.

Any employer contribution toward transit or parking counts toward the same monthly limit as the employee's own pre-tax election. If an employer already subsidizes $100 a month toward a transit pass, the employee can still elect up to an additional $240 pre-tax before hitting the $340 cap.

Summit Health Benefits sets up commuter benefits alongside your Section 125 plan. Running both programs correctly, with the right code section applied to each, protects the FICA savings on both sides of your payroll. Talk to a benefits specialist.

Is a Commuter Benefit the Same as a Section 125 Plan?

No. A <a href="/blog/section-125-cafeteria-plan-2026-guide">Section 125 cafeteria plan</a> is built under a completely different part of the Internal Revenue Code and requires a written plan document, defined eligibility rules, and annual nondiscrimination testing. A Section 132 commuter benefit needs none of that. An employer can offer a commuter benefit with no Section 125 plan in place at all, and a business that already runs a Section 125 plan for medical and dental elections still needs a separate commuter benefit setup, since transit and parking are not benefits a cafeteria plan is allowed to include.

The FICA math looks similar on paper. Every pre-tax dollar an employee elects for transit or parking reduces the employer's FICA obligation by 7.65%, the same rate that applies to a <a href="/blog/maximizing-fica-tax-savings">Section 125 pre-tax election</a>. An employer running both programs at scale is recapturing FICA on two separate buckets of payroll, not doubling up on the same dollars.

Do Employers Have to Offer Commuter Benefits?

In a growing number of cities, yes. New York City has required employers with 20 or more full-time employees in the five boroughs to offer a pre-tax transit benefit since 2016. San Francisco and Berkeley have run similar ordinances covering employers with 20 or more employees since 2009. Washington, D.C. and Seattle both require it for employers above a 20-employee threshold as well. New Jersey became the first state to require pre-tax commuter benefits statewide, effective 2020, again for employers with 20 or more employees. An employer with staff working inside any of these jurisdictions should confirm its payroll platform actually offers the transit deduction, not just its home-office location.

Outside these mandated areas, offering a commuter benefit is optional. Many employers near a transit hub choose to offer it anyway, since the FICA savings and the employee's own income tax savings cost the employer nothing beyond payroll setup, and the benefit only has value for employees who actually use transit or paid parking. Small employers weighing which pre-tax perks to add first can see how commuter benefits stack up against other low-cost options in our <a href="/blog/small-business-health-insurance-alternatives-2026">guide to small business health insurance alternatives</a> and our roundup of <a href="/blog/zero-cost-employee-health-benefits-2026">zero-cost employee benefits</a>.

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Frequently Asked Questions

What is the 2026 monthly limit for pre-tax commuter benefits?
The 2026 monthly limit is $340 for transit and vanpool combined and a separate $340 for qualified parking, according to IRS Revenue Procedure 2025-32. Both limits increased from $325 in 2025. An employee using both transit and paid parking can elect up to $680 a month in combined pre-tax payroll deductions.
Are commuter benefits part of a Section 125 cafeteria plan?
No. Commuter benefits are authorized under Internal Revenue Code Section 132(f), a separate code section from Section 125. A commuter benefit does not require a written plan document or nondiscrimination testing, while a Section 125 cafeteria plan requires both. Employers commonly run each program alongside the other, but they are not the same benefit.
Does a commuter benefit save the employer money the same way Section 125 does?
Yes. Every pre-tax dollar an employee elects for transit or parking reduces the employer's FICA obligation by 7.65%, the same rate that applies to a Section 125 election. The two savings pools are separate, since commuter and Section 125 elections apply to different payroll dollars.
Which cities require employers to offer commuter benefits?
New York City, San Francisco, Berkeley, Washington, D.C., and Seattle all require employers above a 20-employee threshold to offer a pre-tax transit benefit. New Jersey requires it statewide for employers with 20 or more employees, the first state-level mandate of its kind, effective 2020. Employers with staff working in any of these jurisdictions should confirm coverage regardless of where the company is headquartered.
Can an employee use both the transit benefit and the parking benefit at the same time?
Yes. Transit and parking are tracked under two separate monthly limits, each $340 for 2026, so an employee who takes a train and then pays for parking at the station can elect pre-tax dollars toward both in the same month, up to $680 combined.
Does an employer contribution toward transit count against the monthly limit?
Yes. Any amount an employer contributes toward an employee's transit pass or parking counts toward the same $340 monthly limit as the employee's own pre-tax election. If the employer already covers part of the cost, the employee can only elect the remaining amount up to the cap.
Do employees need a Section 125 plan in place to get a commuter benefit?
No. A commuter benefit can be offered on its own under Section 132(f) without any Section 125 cafeteria plan in place. Employers that already run a Section 125 plan for medical, dental, or FSA elections still need a separate commuter benefit setup, since transit and parking cannot be included inside a cafeteria plan.

Ready to add commuter benefits alongside your existing Section 125 plan, or set up both from scratch? Summit Health Benefits reviews your full pre-tax payroll picture at no cost.

See Employer Benefit Options

Sources: Internal Revenue Service (Revenue Procedure 2025-32, 2026 qualified transportation fringe benefit limits, Internal Revenue Code Section 132(f)), New York City Department of Consumer and Worker Protection (Commuter Benefits Law), San Francisco Department of the Environment (Commuter Benefits Ordinance), New Jersey Department of Labor and Workforce Development (Commuter Transportation Benefit Law).