Tax questions

March 31, 2000

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Our company just offered us the option of a pre-tax deduction for parking fees that are deducted from our weekly pay checks. How does taking a pre-tax deduction benefit me? Is there an alternative deduction I can take if I continue to have the fee withheld from my weekly pay? Is it more beneficial? Is there a downside?

By taking a pre-tax deduction out of your weekly paycheck for the benefit of qualified parking expense, you will reduce the income tax and FICA tax owed on such amounts.

Note, there is a maximum amount of $175 a month that can be excluded from such tax pursuant to the Qualified Transportation Fringe benefit rules.

Any additional monthly parking expenditures would constitute taxable income in the form of W-2 income, subject to income and FICA tax.

Since the parking would most likely constitute a personal expenditure, it would not otherwise be deductible by you on Schedule A, Form 1040, as a miscellaneous itemized deduction. Therefore, it is advisable to join the plan.

A downside is that employer contributions to a qualified profit-sharing retirement plan based on taxable wages would be less since your compensation is reduced by the qualified parking expenditures.

Keith E. Huebel, CPA, Horan & Associates Financial Advisors, Ltd.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.