Repeal of Tax Changes Affect Parking Decals
Alan M. West, Assistant Vice President and University Controller
The Tax Cuts and Jobs Act passed by Congress in December 2017 affected employer-provided qualified transportation fringe benefits, including workplace parking plans. Beginning in 2018, the Employee parking costs were no longer a deductible expense, meaning they were subject to Social Security (or FICA Alternative for participating employees), Medicare and Federal withholding taxes.
On December 20, 2019, the President signed into law the Taxpayer Certainty and Disaster Relief Act of 2019. This act repealed the controversial “parking tax” that was enacted in 2017. In response to this repeal, the University plans to return to parking decal deductions on a pre-tax basis which results in tax savings for both employees and the University.
What is changing?
Beginning with the pay period ending February 6, 2020, all parking decal deductions through payroll will be permitted on a pre-tax basis only.
Employees will automatically have their parking deductions changed from an after-tax to pre-tax basis for the pay period ending February 6, 2020. All existing 2020 after-tax parking deductions will also be changed to a pre-tax basis, and employees will be refunded the corresponding taxes for those deductions.
Employees who prefer to pay for their parking decals on an after-tax basis may do so during the annual decal renewal period later this spring but will not be able to do so through payroll deduction.
How much is the tax savings?
Depending on an employee’s selected parking decal, income tax bracket and Form W-4 tax data, the tax savings varies. For a single pay period, for example:
Annual Decal Official Business Orange Staff Commuter
Deduction per pay period $22.50 $16.50 $8.50
Social Security (6.2%)* $1.40 $1.02 $0.53
Medicare (1.45%) $0.33 $0.24 $0.12
Federal Withholding (Est. 22%) $4.95 $3.63 $1.87
Estimated Total Taxes $6.68 $4.89 $2.52
*Employees participating in the FICA alternative program will save 7.5%, instead of 6.2% for Social Security.
What office can assist me if I have questions?
Please contact University Payroll Services for assistance at (352)392-1231 or email@example.com. While they cannot provide tax advice to employees, they can address general questions regarding payroll taxes.