New York City (NY) benefits law and tax program
The New York City’s Commuter Benefits Law, launched in 2016, requires employers with 20 or more employees to offer commuter or transit benefits to their workforce. The program is designed to reduce traffic congestion, lower air pollution, and encourage the use of sustainable transportation options such as public transit and vanpools. Additionally, it provides tax savings for both employees and employers by allowing pre-tax payroll deductions for commuting expenses, making alternative transportation more accessible and affordable.
Covered employee:
Defined as a full-time employee, meaning anyone who works an average of 30 hours or more per week for a covered employer.
Covered employee:
Employer with 20 or more full-time employees working within New York City.
Exemptions:
- The U.S. government, the State of New York, the City of New York, or any related public agencies or municipalities.
- Employers with a collective bargaining agreement, except when 20+ full-time employees are not covered by such an agreement—those employees are still eligible.
- Employers not required to pay federal, state, and city payroll taxes.
All covered employers must offer full-time employees the option to use pre-tax earnings to pay for qualified transportation benefits (excluding parking), in line with federal law. If the number of full-time employees drops below 20, any existing employee who was eligible must continue receiving the benefit for as long as they remain employed.
Want to know more about compliance requirements in New York City, or want to start offering commuter benefits to your employees?
Financial penalties in New York City are assessed on a case-by-case basis and can reach up to $3,000 in the first year. Repeat offenses result in even higher fines, escalating every 30 days. For larger companies, these violations can quickly result in substantial financial penalties, making non-compliance an expensive and serious risk.
For New York City, the nationwide IRS tax-free limits for commuter benefits apply. For 2025, employees can allocate up to $325 per month for transit and $325 per month for parking, reducing taxable income.
- Pre-tax savings: Employees can lower their taxable income by setting aside funds for transit and vanpool expenses.
- Employer tax benefits: Businesses save an average of 7.65% per employee on payroll taxes.
- Direct transit subsidies: Employers can provide up to $325 per month per employee in tax-deductible transit benefits.
- Additional incentives: Some cities and states offer grants, tax credits, or subsidies for implementing commuter benefit programs.
