Qualified Transportation Benefits: Employee Fringe Benefits (2026 IRS Guide)
This guide covers “Qualified Transportation Benefits” within employee fringe benefits. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.
Adapted from Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.
Context for these rules
This section discusses exclusion rules that apply to benefits you provide to your employees for their personal transportation, such as commuting to and from work. These rules apply to the following transportation benefits.
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De minimis transportation benefits.
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Qualified transportation benefits.
Qualified Transportation Benefits
This exclusion applies to the following benefits.
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A ride in a commuter highway vehicle between the employee’s home and work place.
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A transit pass.
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Qualified parking.
You may provide an employee with any one or more of these benefits at the same time.
Qualified transportation benefits can be provided directly by you or through a bona fide reimbursement arrangement. A bona fide reimbursement arrangement requires that the employee incur and substantiate expenses for qualified transportation benefits before reimbursement. However, cash reimbursements for transit passes qualify only if a voucher or a similar item that the employee can exchange only for a transit pass isn’t readily available for direct distribution by you to your employee. A voucher is readily available for direct distribution only if an employer can obtain it from a voucher provider that doesn’t impose fare media charges or other restrictions that effectively prevent the employer from obtaining vouchers. See Regulations section 1.132-9(b)(Q&A 16–19) for more information.
Compensation reduction agreements.
A compensation reduction agreement is a way to provide qualified transportation benefits on a pre-tax basis by offering your employees a choice between cash compensation and any qualified transportation benefit. A compensation reduction arrangement can be used with a bona fide reimbursement arrangement. For each month, the amount of the compensation reduction can’t exceed the monthly limits for transportation benefits described under Exclusion from wages, later. For more information about providing qualified transportation fringe benefits under a compensation reduction agreement, see Regulations section 1.132-9(b)(Q&A 11–15).
Commuter highway vehicle.
A commuter highway vehicle is any highway vehicle that seats at least six adults (not including the driver). In addition, you must reasonably expect that at least 80% of the vehicle mileage will 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 one of the following.
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Mass transit.
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In a vehicle that seats at least six 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 you provide to your employees on or near your business premises. It 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.
Qualified bicycle commuting reimbursement eliminated.
Section 11047 of P.L. 115-97 suspended the exclusion of qualified bicycle commuting reimbursements from your employee’s income for any tax year beginning after 2017 and before 2026. For tax years beginning after 2025, P.L. 119-21 permanently eliminates the exclusion of qualified bicycle commuting reimbursements from your employee’s income.
Employee.
For this exclusion, treat the following individuals as employees.
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A current employee.
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A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control.
A self-employed individual isn’t an employee for qualified transportation benefit purposes.
Exception for S corporation shareholders.
Don’t treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder is someone who directly or indirectly owns (for any day during the tax year) more than 2% of the corporation’s stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but don’t treat the benefit as a reduction in distributions to the 2% shareholder. For more information, see Revenue Ruling 91-26, 1991-1 C.B. 184.
Relation to other fringe benefits.
You can’t exclude a qualified transportation benefit you provide to an employee under the de minimis or working condition benefit rules. However, if you provide a local transportation benefit other than by transit pass or commuter highway vehicle, or to a person other than an employee, you may be able to exclude all or part of the benefit under other fringe benefit rules (de minimis, working condition, etc.).
Exclusion from wages.
You can generally exclude the value of transportation benefits that you provide to an employee during 2026 from the employee’s wages up to the following limits.
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$340 per month for combined commuter highway vehicle transportation and transit passes.
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$340 per month for qualified parking.
Benefits more than the limit.
If the value of a benefit for any month is more than its limit, include in the employee’s wages 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.
Qualified transportation benefits aren’t deductible. Sections 274(a)(4) and 274(l) of the Internal Revenue Code provide that no deduction is allowed for qualified transportation benefits (whether provided directly by you, through a bona fide reimbursement arrangement, or through a compensation reduction agreement) incurred or paid after 2017. Also, no deduction is allowed for any expense incurred for providing any transportation, or any payment or reimbursement to your employee, in connection with travel between your employee’s residence and place of employment, except as necessary for ensuring the safety of your employee. While you may no longer deduct payments for qualified transportation benefits, the fringe benefit exclusion rules still apply and the payments may be excluded from your employee’s wages, as discussed earlier. Although the value of a qualified transportation fringe benefit is relevant in determining the fringe benefit exclusion and whether the section 274(e)(2) exception for expenses treated as compensation applies, the deduction that is disallowed relates to the expense of providing a qualified transportation fringe, not its value. For more information, see Regulations sections 1.274-13 and 1.274-14.
More information.
For more information on qualified transportation benefits, including van pools, and how to determine the value of parking, see Regulations section 1.132-9.
Using the guidance
Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.
Sources and further reading
- Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits: Fringe Benefit Exclusion Rules — Transportation (Commuting) Benefits — Qualified Transportation Benefits — Internal Revenue Service; 2026 edition.
The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.