IRS Increases Commuter Benefit Limits for 2026

As more employees make their way back into the office (and out of those cozy home offices), commuting costs are once again part of the daily equation. Gas, parking, and public transit fees can really add up — and both employees and employers are looking for ways to ease the burden.

Here’s some good news: the IRS has announced an increase to the monthly pretax commuter benefits, effective January 1, 2026. This means employees can soon set aside a higher amount of pretax income to cover qualified transportation and parking expenses — a simple way to save money while reducing taxable income.

What Are Commuter Benefits?

Commuter benefits allow employees to use pretax dollars to pay for qualified transit, vanpool, or parking expenses. It’s a win-win: employees save on taxes, and employers can reduce payroll taxes while offering a valuable perk that supports financial wellness.

Eligible expenses typically include:

• Transit passes (bus, train, subway, or ferry)

• Vanpool commuting expenses

• Qualified parking at or near the workplace

• Parking at a location where the employee commutes by public transit or carpool

What’s Changing in 2026

While the IRS hasn’t yet published the exact new limits, we know the monthly cap for 2025 is $315 per month for both transit and parking. The 2026 increase is expected to align with inflation and rising transportation costs, allowing employees to set aside even more each month tax-free.

This adjustment is part of the IRS’s annual cost-of-living updates — small but meaningful changes that can have a big impact for employees who commute regularly.

Few Employers Offer These Perks (But They Should!)

According to SHRM’s 2025 Employee Benefits Survey, only 12% of employers offer a transit subsidy and 10% offer parking assistance — meaning many organizations are missing out on an affordable, high-impact benefit.

For small businesses, this is an easy way to stand out in a competitive hiring market. Adding commuter benefits shows your team that you care about their day-to-day experience — not just their paycheck.

Why Employers Should Consider Adding Commuter Benefits

Here are a few reasons why commuter benefits are worth considering:

✅ Employee satisfaction: Perks that save real money make employees feel valued and supported.

✅ Tax savings: Contributions are pretax, so both the employee and employer save on payroll taxes.

✅ Recruitment & retention: Unique, flexible benefits can help your organization attract and retain great talent.

✅ Sustainability: Encouraging public transit or vanpool options can also support your company’s environmental goals.

How Elevated HR Can Help

Not sure where to start? Elevated HR can help you evaluate your current benefits package and determine whether commuter benefits make sense for your team. We’ll help you navigate compliance, IRS limits, and best practices to keep your programs competitive and cost-effective.

The Bottom Line

With the IRS commuter benefit limits increasing in 2026, now is the perfect time to review your overall benefits strategy. Even small perks like transit or parking assistance can make a big difference in employee satisfaction — and in today’s market, every edge counts.

Ready to refresh your 2026 benefits strategy? Let’s chat about options that fit your business and your budget.

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