You can exclude small, infrequent transportation benefits (called de minimis transportation benefits) from an employee’s taxable wages. These include occasional local transport fares—like an occasional transportation fare because an employee is working over their contracted hours—if the value is minimal and tracking it would be unreasonable. Regular or routine transportation benefits don’t qualify. 

You can exclude up to $21 per month for discounted transit passes, tokens, fare cards, or vouchers, or reimburse commuting costs, as long as it’s done through a proper system for verifying public transit use. This exclusion only applies to commuting for business reasons, not personal travel. 

Qualified Transportation Benefits 

Employers can exclude the following benefits: 

• Commuter highway vehicle: A commuter highway vehicle is any highway vehicle that seats at least six adults (not including the driver). In addition,  at least 80% of the vehicle mileage must be for transporting employees between their homes and workplace with employees occupying at least one-half the vehicle’s seats (not including the driver’s). 
• Transit pass. A transit pass is any pass, token, farecard, voucher, or similar item entitling a person to ride, free of charge or at a reduced rate, on mass transit, or In a vehicle that seats at least 6 adults (not including the driver) if a person in the business of transporting persons for pay or hire operates it. 
• Qualified parking. Qualified parking is parking accessible to your employees on or near your business premises; this includes parking on or near the location from which your employees commute to work using mass transit, commuter highway vehicles, or carpools. It doesn’t include parking at or near your employee’s home. 

You can generally exclude the value of transportation benefits that you provide to an employee during 2025 from the employee’s wages up to: 

• $325 per month for combined commuter highway vehicle transportation and transit passes. 
• $325 per month for qualified parking. 

If the value of a benefit for any month exceeds these limits, it must be included in the employee’s wages for the amount over the limit minus any amount the employee paid for the benefit. You can’t exclude the excess from the employee’s wages as a de minimis transportation benefit. 

This exclusion applies to property and services you provide to an employee so that the employee can perform their job. It applies to the extent the cost of the property or services would be allowable as a business expense or depreciation expense deduction to the employee if they had paid for it. The employee must meet any substantiation requirements that apply to the deduction.  

Examples of working condition benefits include: 

• an employee’s use of a company car for business,  
• an employer-provided cell phone provided primarily for non-compensatory business purposes, 
• and job-related education provided to an employee. 

This exclusion also applies to a cash payment you provide for an employee’s expenses for a specific or prearranged business activity if such expenses would otherwise be allowable as a business expense or depreciation expense deduction to the employee.  

Employees must verify that the payment is used for those expenses and to return any unused part of the payment. 

Further guidance on fringe benefits can be found on the IRS website.