Commuter benefits in 2025: A playbook for HR leaders

Return‑to‑office mandates are arriving just as commuting reaches record highs: the average U.S. worker now devotes almost 54 minutes a day and roughly $8,466 a year on the trip to work. Researchers have shown that adding only twenty extra minutes to that journey erodes job satisfaction as much as a 19% pay cut. Not surprisingly, employers are leaning on commuter benefits—89% of remote and hybrid‑friendly firms already offer some form of program—to stay competitive in recruiting and retention.

The 2025 tax baseline

Under Internal Revenue Code §132(f), both employees and employers can exclude commuter dollars from federal income and payroll taxes. For 2025 the IRS inflation‑adjusted caps rise to $325 per month for transit or vanpool expenses and $325 for qualified parking, and the two limits can be combined when costs are split. As a forward-thinking HR leader, be sure toupdate payroll and benefit files now so the higher ceiling is reflected in January pay cycles.

A rapidly expanding compliance map

Local legislation is transforming what was once a voluntary perk into a statutory requirement:

• Bay Area – Regulation 14, Rule 1 now recognizes a “telework one day each week” option alongside traditional pre‑tax or subsidy models, giving 50+‑employee firms more flexibility in meeting the rule.
• New York City – Since 2016, employers with 20 or more full‑time staff in the five boroughs must let employees pay transit costs pre‑tax.
• Seattle – The city’s Commuter Benefits Ordinance obliges organizations with 20 or more workers worldwide to allow monthly pre‑tax payroll deductions for transit or vanpool fares.
• Washington, DC – The Sustainable DC Act requires entities with 20 or more employees to provide at least one qualified transit benefit option, such as SmartBenefits®, or face penalties.
• Philadelphia – Firms employing 50 or more covered workers inside city limits must offer a benefit at least equal to the IRS cap, effective since 2023.
• New Jersey – A statewide law compels employers with 20 or more staff to offer a pre‑tax transportation fringe benefit; enforcement began in 2020.
  
  

Regulators have made clear that written notices, record‑keeping, and annual certifications are part of compliance, so make sure to verify local filing calendars as they refresh benefit materials.

Designing a commuter benefit that works for your people 

Start with a commute audit—survey routes, costs, parking shortages, and first‑/last‑mile pain points—to understand what your workforce truly needs. Most employers then layer the following tools:

• Pre‑tax payroll deduction for transit passes, vanpool fees, or garage parking near the office or transit hubs.
• Direct subsidy or match, often a flat monthly dollar amount credited to the same debit card employees use for their own pre‑tax dollars.
• Company shuttles, vanpools, or shared‑mobility memberships where public transit is sparse.
• Telework stipends or “parking cash‑out” where local rules allow remote or hybrid schedules to substitute for traditional benefits.
  
  

Pick a third‑party administrator whose payment cards integrate with emerging fare systems (for example, OMNY in New York) and that can pass automated files to your HRIS and payroll platforms. Integration matters: every dollar run through Section 132(f) reduces employer FICA outlay by 7.65%, savings that can help fund the program itself.

Make sure to communicate clearly

Employees enroll when they understand the money on the table. Frame the offer in plain language—“Set aside up to $325 a month tax‑free for MetroCard swipes or garage fees and keep roughly $1,200 more of your paycheck each year.” Emphasize flexibility: funds roll forward while the employee remains on payroll, and deduction amounts can be changed monthly to match hybrid schedules. Reinforce that weekend or non‑work transit rides are IRS‑qualified as long as the card is used on public transportation.

Measure and iterate

Track participation rate, average monthly deduction versus the federal cap, retention differentials between participants and non‑participants, and any mileage or CO₂ reductions reported by your administrator. These metrics translate abstract tax policy into ESG wins and hard ROI for leadership.

Questions you’ll hear—and how to answer them

• Can I use the benefit on weekends? Yes—IRS rules do not require receipts or limit usage to workdays.
• What if my train pass costs more than $325? You can load after‑tax dollars on the same card for seamless payment.
• Does parking at my home count? No. Under federal rules qualified parking must be near the workplace or a transit station, not a residence.

The bottom line

A well‑run commuter benefit lightens financial stress for employees, trims payroll taxes for the company, and keeps you on the right side of a fast‑growing patchwork of local laws. As 2025 begins, the message to HR leaders is clear: make the journey to work a little less costly and a lot more sustainable, and your workforce will thank you.