Video: Parking & Transit Benefits, How They Work

Parking and transit accounts let employees pay for eligible work commuting costs with pretax dollars under Internal Revenue Code Section 132(f). Employers usually offer them alongside their Section 125 cafeteria plan, with contributions taken through payroll, and Northwest Group Services (NWGS), a licensed TPA, handles the administration and claims.

How It Works

• The employee elects a monthly pretax amount for parking, transit, or both.
• The amount is deducted from pay before taxes.
• Where the plan includes a benefits card, the employee pays eligible costs with the card.
• Otherwise, the employee pays out of pocket and submits the Parking & Transit Claim Form. Reimbursement is paid to the employee.

What’s Eligible

• Qualified parking on or near the employer’s business premises, or at a location where the employee parks to commute by mass transit, vanpool, or carpool (such as a park-and-ride lot)
• Transit passes, including passes, tokens, fare cards, and vouchers for bus, rail, or ferry
• Vanpooling in a commuter highway vehicle that seats at least six adults (not counting the driver) and is used mainly for commuting

What’s Not Eligible

• Parking at or near the employee’s home
• Bicycle commuting costs
• Commuting costs that aren’t qualified parking, a transit pass, or a qualifying vanpool, such as tolls, gas, or mileage

2026 and 2027 IRS Monthly Limits

• Qualified parking: $340 per month for 2026; $350 per month for 2027
• Transit passes and vanpooling (combined): $340 per month for 2026; $350 per month for 2027

The parking and transit limits are separate, so an employee can use both.

Key Rules

• Parking and transit are separate accounts. Submit parking expenses to the parking account and transit expenses to the transit account.
• Unused balances carry forward from month to month for future eligible expenses.
• Submit claims within 12 months of the date of service.
• Claim cutoffs are the 10th and 25th of each month. Claims are processed the next business day.

For Employers

• The pretax amount is excluded from wages, which reduces payroll taxes for both the employer and the employee.
• NWGS handles plan administration and member claims, so your HR team doesn’t have to.

Frequently Asked Questions

What is a Qualified Transportation Fringe (commuter benefit)?

A Qualified Transportation Fringe, often called a commuter benefit, lets employers provide or reimburse certain work commuting costs, such as qualified parking, transit passes and vanpool rides, without including them in the employee's wages, up to monthly IRS limits. Employees can pay for these benefits with pretax pay through a compensation reduction agreement.

What are the 2026 and 2027 parking and transit limits?

For 2026, up to $340 a month for qualified parking and up to $340 a month combined for transit passes and commuter highway vehicle (vanpool) rides can be excluded from wages. For 2027, both monthly limits rise to $350 (IRS Rev. Proc. 2026-35). The two limits are separate, so an employee who both parks and rides transit can use both.

Can I use my commuter benefit for Uber, Lyft or a taxi?

Generally no, for a typical ride by yourself. Pretax transit benefits cover transit passes and rides in a commuter highway vehicle, meaning a vehicle that seats at least six adults (not counting the driver) and is used mainly for commuting, or a similar vehicle operated by a company in the business of transporting people for hire. An ordinary car ride with a rideshare or taxi driver doesn't meet those definitions.

Are tolls, gas or mileage covered?

No. Qualified transportation benefits are limited to qualified parking, transit passes and commuter highway vehicle rides. Tolls, gas, mileage and other driving costs aren't included.

Can I use my commuter benefit for bike commuting?

Not anymore. The pretax exclusion for qualified bicycle commuting reimbursements was suspended for 2018 through 2025, and federal law permanently eliminated it starting in 2026.

Can I use my parking benefit for parking near my home?

No. Qualified parking is parking on or near the employer's business premises, or near a location where you catch mass transit, a vanpool or a carpool, such as a park-and-ride lot. Parking at or near your home doesn't qualify.

Can employers deduct the cost of commuter benefits?

No. Since 2018, employers can't take a tax deduction for qualified transportation benefits, whether they provide them directly, through reimbursement, or through employee pretax pay. The benefits can still be excluded from employees' wages up to the monthly limits, which reduces payroll taxes.

Watch the Parking & Transit video above, or call NWGS at (888) 808-3008.

Sources

• IRS Revenue Procedure 2026-35 (2027 inflation adjustments)
• IRS Publication 15-B: Employer’s Tax Guide to Fringe Benefits
• IRS Revenue Procedure 2025-32 (2026 inflation adjustments)

General information only; not tax or legal advice.

Paper Claim Form

Download the Parking & Transit Claim Form (PDF)

Parking and transit claims use this form, not the FSA claim form. Include receipts or other documentation, and send the completed, signed form by one of these methods:

• Fax: 419-887-1214
• Email: nwgsclaims@nwgsonline.com
• Mail: NWGS, 8245 Farnsworth Road, Suite B, Waterville, Ohio 43566

Questions? Call (888) 808-3008.

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