Commuter Tax Credit Restored: What it means for New York & New Jersey commuters

By the Star-Ledger Editorial Board :Buried inside the last-minute deal to avert the “fiscal cliff,” Congress tucked an overdue gift for commuters: Restoring a commuter tax credit that offers financial relief for toll-weary travelers.  The move — which allows commuters who take the train, bus or van-pool to deduct nearly $2,900 a year — erases an expensive bias against mass transit from the U.S. tax code.  Last year, the pre-tax income transit riders could use toward mass transit fares dropped to $125 a month, down from $230 a month in 2011, when Congress failed to renew the higher deduction for 2012. Meanwhile, the tax-free parking deduction for commuters who drive to work increased by $10, to $240 a month.  Coming on the heels of massive fare hikes by the Port Authority and NJ Transit, commuters were given a financial incentive to drive, rather than ride, to their jobs.  With the deal, commuters’ tax benefits for mass transit and driving are back on equal footing.  And it’s retroactive, covering all of 2012.

The higher deduction equals a $400 tax cut for a commuter who makes $50,000 a year and spends at least $240 a month on transit, according to TransitCenter, an advocacy group. In the New York metro area, 15,000 employers offer the benefit, which saved New York-area commuters $200 million in 2011.  Don’t mistake the mass transit tax credit for a strap-hanger give-away. It’s good public policy, meant to convince workers in gridlocked cities to take the bus or train.  In New Jersey, the most densely populated state in America, mass transit helps keep the highways unclogged — a key for economic growth and quality of life. It reduces carbon emissions and our reliance on fossil fuels.  Congress didn’t do New Jersey or New York any favors when it delayed a vote on Hurricane Sandy aid. But for New York-area commuters, restoring this tax credit was a pleasant surprise.