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.
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:
To be eligible for the credit, your Maryland business must fall under one of the following entity types:
In order to claim the Maryland Commuter Tax credit, you must:
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.
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.
Here are the numbers |
|
Karen’s bus fare |
$68.00 |
Maryland Commuter Tax Credit (50%) |
$34.00 |
Federal deduction as a regular business expense (25%) |
$17.00 |
Maryland deduction as a regular business expense (8.25%) |
$5.61 |
Net cost to your business |
$11.39 |
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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