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Taxation of Payroll Deduction for Employee Parking Permits

The Tax Cuts and Jobs Act eliminates the pre-tax parking fringe benefit currently offered through payroll deduction.  Under prior law, payroll deductions for parking fees were offered on a pre-tax basis, meaning employees were not taxed on deductions used to pay for parking. 

Effective July 1, 2019, parking permit fees will no longer be a pre-tax deduction.  This means your taxable income will now include the cost of your parking permit.  The change should have a minimal impact on net pay.  For example, an employee who pays $30 per month in parking fees may see a $6 to $9 in additional tax withholding and an equal reduction in net pay.  The tax withheld will vary based on your income tax bracket, W-4 information, and amount of pay. 

Employees benefiting from the current pre-tax deduction will be automatically transitioned to post-tax payroll deductions.  The amount deducted for parking will remain the same. Employees do not need to take any action.      



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