What is a Commuter FSA Used For?
If you’re familiar with the concept of a Flexible Spending Account (FSA), you’ll understand what a Commuter (or Transit and Parking) FSA is. Money saved in these accounts can be used toward – you guessed it – mass transit and parking expenses that are related to work.
You can save up to $280 per month (2022 IRS limit) for both transit and parking. For example, someone who has the full contribution ($560 a month) deducted from their paycheck in a 24% tax bracket would save about $1,600 per year.
Transit Account: A Transit Account enables you to set aside money on a pre-tax basis to pay for eligible workplace mass transit expenses such as the price of tickets, vouchers and passes to ride a subway, train, or city bus, or the cost of transportation in a van pool, etc. The money can be used if said transportation involves travel between your residence and place of employment.
Parking Account: A Parking Account allows you to set aside pre-tax money to pay for eligible workplace parking expenses, parking costs at or near your work site, and parking costs where you access transportation to work, such as a train station or van pool stop. Not surprisingly, parking on or near your own property does not qualify. Nice try!
In both instances, you can only use the amount that has been saved. Because the money is set aside through deductions from your paycheck, you must wait to be reimbursed until after the first deduction has been made. Unused funds carry over as long as you continue to participate in the plan. Elections can be stopped or changed as often as your employer allows.
While you can use your debit card to purchase transit cards or for parking, you must save receipts. To ensure that the funds are being used for IRS-approved commuter and parking needs, you may be required to itemize invoices to verify the eligibility of expenses. Some apps allow you to take pictures of receipts and add them to their account – no computer necessary.
A Commuter FSA covers:
- Mass transit, including the price of tickets, vouchers and passes to ride a subway, train, or city bus, or the cost of transportation in a van pool, etc.
- Parking, including in lots, garages and at meters
- UberX Share
- Lyft Line
Note: Uber and Lyft services are not covered if they are not associated with uberX Share and Lyft Line. Due to the COVID-19 pandemic, these services are currently not available.