At the University of Oregon, eligible employees are allowed to purchase faculty/staff parking permits through payroll deductions on a pre-tax basis. Parking permits are available to employees on a pre-tax basis under the IRS qualified transportation fringe benefit rules. Employees may also choose to have their parking permit deduction computed on a post-tax basis.
Pre-Tax Benefit
As a pre-tax benefit, the cost of the employee's parking permit (up to the IRS established limit) will be deducted from gross pay before the calculation for federal and state income taxes and FICA taxes. Future tax treatment of this benefit is subject to on-going changes in federal and state tax governing provisions.
Since participation in the pre-tax plan will reduce the amount of an employee's taxable compensation, there could be a slight decrease in the employee's future social security benefits, which are based on taxable compensation.
Post-Tax Benefit
To have the parking permit computed on a post-tax base, employees must submit a
Pre-Tax Parking Waiver to Public Safety at the time they complete a parking permit form.
Questions and Answers:
1. What is the meaning of pre-tax?
Pre-tax means that the cost of the employee's parking permit will be deducted from gross pay (up to the IRS established limit) before state and federal taxes are calculated. For the calendar year 2008, the pre-tax eligible amount for parking is up to $220 per month. This limit will be revised to comply with future IRS cost-of-living adjustments.
2. Who can participate in the pre-tax plan?
All regular employees may participate in the Plan. Student employees and temporary employees are ineligible.
3. How does an employee enroll in the pre-tax plan?
All parking deductions will be made by default on a pre-tax basis unless the employee signs a waiver form indicating that he or she has chosen to opt-out of the Plan. If an employee chooses to opt-out, payroll parking deductions will be made on an after-tax basis. Once each plan year, an employee may change his or her election for future parking deductions.
5. What tax advantages are available through the pre-tax plan?
The pre-tax plan enables eligible employees to pay for faculty/staff parking permits with pre-tax dollars through salary reduction rather than regular pay. Savings will vary depending on how much the employee pays for long term parking as well as the effective tax rate of the employee. Gross taxable income will be reduced by the pre-tax benefit, so no federal, state or FICA taxes are deducted on that amount. The table below is shown as an illustration.
|
|
With Pre-Tax Parking Plan |
Without Pre-tax Parking Plan |
|
Gross Monthly Pay |
$2,500.00 |
$2,500.00 |
|
Pre-Tax Parking Under the IRS Plan |
100.00 |
|
|
Taxable Income |
2,400.00 |
2,500.00 |
|
Estimated Federal Tax (15%) |
360.00 |
375.00 |
|
Estimated State Tax (9%) |
216.00 |
225.00 |
|
FICA Tax |
183.60 |
191.52 |
|
After-Tax Parking |
100.00 |
|
|
Take Home Pay |
$1,640.40 |
$1,608.48 |
Actual tax savings will vary depending on the employee's tax circumstances.
6. Will an employee's participation in the pre-tax plan affect social security benefits?
Participation in the Plan will reduce the amount of an employee's taxable compensation. Accordingly, there could be a slight decrease in the employee's future social security benefits which are based on taxable compensation. For most people, the immediate tax savings of the pre‑tax benefit is likely to be more valuable. If an employee has questions as to the effect of this deduction on their social security benefits, the employee should consult his or her tax advisor.
7. Will an employee's participation in the pre-tax plan affect their retirement or tax deferral plans?
Participation in the Plan will not affect PERS, ORP, or amounts deferred under Internal Revenue Code Sections 403(b) or 457.
8. Is participation in the pre-tax plan optional?
Yes, participation in the plan is optional. If an employee chooses not to participate in the Plan, he or she may pay for a faculty/staff parking permit by cash, check, or through payroll deductions on an after-tax basis.
9. Can an employee stop participating in the Plan at any time?
An employee may stop participation in the pre-tax plan at any time by giving written notification. Participation will cease to be effective for the first pay period following receipt of the notification by the university payroll office. An employee may change his or her election only once each plan year. Participation in the Plan will also end upon termination of employment.