Pre-Tax Parking Permit and Bus Pass Plan

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About the Program

Changes to the federal tax law (Internal Revenue Code Section 132(f)) have made it possible to offer qualified parking and transit expenses on a pre-tax basis. This change is a result of The Transportation Equity Act for the 21st Century (TEA-21), signed into law on June 9, 1998. The University of Arizona implemented the pre-tax benefit for parking and transportation services on August 16, 1999. The following type of services qualify for the pre-tax benefit:

Transit expense up to $65 per month
Employee parkingpermit expense up to $175 per month

The change in tax law provides the employee an opportunity to save money on FICA, and federal and state income taxes. The employee cost per pay period for the parking permit or bus pass will be excluded from their gross income before tax is calculated and it will not show up as taxable income on their W-2 form. In addition to the employee savings, it is estimated that The University will save approximately $65,000 annually on FICA taxes (the employer's required FICA match).

Program Qualifications

To qualify, employees must elect to have their parking permit or bus pass placed on payroll deduction.
Eligible permit expense includes all annual garage and surface lot permits, motorcycle permits, monthly permits and Alternative Transportation "Scratch Off" Permits.
Employees who purchase two types of permits for themselves (i.e. motorcycle and Zone 1) may include both permits as pre-tax subject to the IRS limitation of $175 per month.
Employees must elect to have their parking permit on payroll deduction to obtain the pre-tax benefit and cannot utilize payroll deduction nor receive the pre-tax benefit for other family member’s permits or bus passes
If an employee does not want to participate in the program, that employee cannot utilize payroll deduction. The individual may pay for their parking permit or bus pass by check, cash or credit card. If this is deemed a hardship, employees can contact PTS to make special arrangements for a three-month payment plan.
Employees who purchase both a permit and a bus pass may include both items as pre-tax subject to the IRS limitation of $175/month for the permit and $65/month for the bus pass.
If the employee must replace a lost or stolen permit or bus pass, the replacement fee is considered a cost of parking or transit expense and will be eligible for the pre-tax benefit if the replacement fee is processed through payroll deduction and does not exceed the monthly maximum.
Eligible transit expense includes, all semester, academic and annual U-Pass (SunTran bus passes) sold at Parking and Transportation Services.
Visitor, football, basketball and other special event permits do not qualify.
The standard payroll deduction is 18 (eighteen) pay periods, however an employee may select 9 (nine) pay periods.
The maximum pre-tax benefit allowed to an employee is as follows:

$65 per month for bus passes
$175 per month for permits

Refunds on parking permits or bus passes will be considered a taxable event to the employee if it was originally purchased on a pre-tax basis.
Citations may still be paid through payroll deduction, however they will be processed separately and will not be eligible for pre-tax treatment.

Program Implementation

Employees who elect to purchase their parking permits or bus passes by payroll deduction will automatically be entered into the pre-tax program. If the permit is purchased prior to the new permit year in August, the pre-tax deduction will begin on the first paycheck in September. Permits or bus passes purchased after this date will reflect the pre-tax benefit on the next available pay period.

Parking and Transportation Services will administer the payroll deduction and transmit a file biweekly to the payroll system. Employees must pay for their permit or bus pass by payroll deduction to qualify for the pre-tax benefit.

Questions regarding the purchase of a bus pass or parking permit on payroll deduction can be directed to Parking and Transportation Services at 626-PARK (7275). Questions directly related to the pre-tax portion of the paycheck should be directed to the Payroll Department at 626-3108.