Quick Guide: Maryland Commuter Tax Credit

Maryland businesses (including nonprofits) who already provide or plan to start providing commuter or transportation benefits to their employees may be entitled to state income tax credits.

1. What Are the Credit Details?

The Maryland Commuter Tax Credit allows employers to claim half of eligible commuter expenses made by an employee as part of a workplace commute transportation benefit up to $50 per participating employee per month.

The credit can be applied to personal or corporate income tax or insurance premium tax. Credit can be applied up to the total of the tax liability ($50 per employee). If the credit is greater than the tax liability, the overage is not eligible to be applied to any other tax year.Employers may only claim employee transportation expenses if the expense meets one of the following eligibility requirements:

• Transit instruments, including MTA passes, tickets, fare cards, or vouchers to ride publicly or privately owned transit systems not including taxi services
• Expenses associated with a qualified company van pool program (learn what constitutes a “qualified” vanpool), including van purchase/lease, fuel, insurance, maintenance, safety and equal access upgrades, and taxes and licenses
• Company guaranteed ride home program, including expenses to provide to an employee currently commuting home by transit or vanpool transportation due to an unexpected circumstance
• Company cash in lieu of parking program, including the expense of providing a taxable cash amount that is equivalent to what the cost of providing parking to the employee would be

2. How Do I Know If My Businesses Is Eligible?

To be eligible for the credit, your Maryland business must fall under one of the following entity types:

• Sole proprietorships
• Corporations
• Pass-through entities (e.g., partnerships, S corporations, limited liability companies and business trusts)

3. How Do I Claim the Credit?

In order to claim the Maryland Commuter Tax credit, you must:

1. Complete and submit the Maryland Commuter Tax Credit Registration Form to the MTA for each taxable period.
2. File your business’s Maryland income tax return electronically and complete Form 500CRW.

For insurance premium tax, documentation of the credit must be maintained by the taxpayer and available for review if requested by the Insurance Commissioner for three years after claiming the credit. Documentation includes: approval from the agency granting the credit and a list of the names and telephone numbers for the taxpayer's staff who are directly involved in granting the credits.

4. Can You Give Me an Example?

Let’s say you decide to offer commuter benefits at your business. One of your employees, Karen, has a monthly bus pass that costs her $68 each month.

You reimburse Karen for her commute costs and after deducting the Maryland Commuter Tax Credit, and federal and state regular business expenses, your business will end up paying $11.39 for Karen’s commute expenses each month. This provides Karen with a $816 yearly benefit at a cost of only $136.68 per year for your business.

Remember, if Karen’s monthly commute expenses were to exceed $100, your business would still only be permitted to claim a maximum of $50 as stipulated under the Maryland Commuter Tax Credit.  

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