Maximum monthly mass transit tax benefit falls to $125

WASHINGTON—Due to a lack of congressional action, the tax-favored status of an employee benefit tapped by those who use mass transit to get to and from work will be reduced starting Jan. 1, 2012.

Under a provision in a 2009 economic stimulus law, employees have been able to reduce their taxable salaries by up to $230 a month to pay for mass transit expenses. Previously, the maximum was $120 per month.

Just prior to its expiration in 2010, lawmakers agreed to continue the higher mass transit tax break through the end of 2011 as part of a broader measure that temporarily reduced payroll taxes.

However, lawmakers did not include an extension of the higher mass transit contribution limit in a measure they passed this month that extends the payroll tax rate cut by two months.

Without congressional action, the maximum pretax contribution employees can make toward mass transit expenses, such as rail and bus fares will fall to $125 a month effective Jan. 1, 2012.