nonprofit employees face a new tax reality on fringe benefits.
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quick tax tip
with art werner
cpe today
for years, employers could offer free or subsidized parking or public transit passes as a valuable fringe benefit without triggering extra tax for employees. businesses could deduct the cost—up to an inflation-adjusted $325 per month in 2024—while employees enjoyed the perk tax-free.
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that changed under the tax cuts and jobs act (tcja). now, if a business deducts the cost of parking or transit benefits, employees must count it as taxable income. employers can still shield employees from the tax by choosing not to deduct the expense.
but here’s where nonprofits face a unique twist: unlike for-profit businesses, nonprofits generally don’t pay federal income tax. that means the choice to deduct or not deduct the expense is irrelevant—yet the tcja requires nonprofit employees to treat the benefit as taxable income regardless.
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