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New York transit commuters just received a break. The American Taxpayer Relief Act was just signed into law and with it an increase in the Transitchek benefit. How does this benefit work? It’s simple. Transitchek deducts up to $240 a month from your paycheck for commutation and parking expenses before any taxes are taken out. You receive a credit card to “spend” the money on designated transit expenses (parking, train and bus tickets for example). The money that you would normally spend on the transportation with “post tax” dollars is now spent with “pre-tax” dollars.
Transitchek math works like this.
Commuter A earns $3000 a month before taxes. She is taxed at a rate (Federal and State) of 28%. This means her take home pay every month is $2160. She then spends $240 on her train ticket and parking, leaving her with $1,920.
Commuter A then applies for Transitchek. She still earns $3000 a month. Her $240 of transportation costs are deducted from her check and added to her Transitchek credit card before tax is taken out of her pay. ($3000 – $240) at a tax rate of 28% leaves her with $1,987.20 after taxes. She then spends $240 on her train ticket and parking using her Transitchek credit card – preloaded with $240 for the expenses.
She takes home $67.20 more per month and has not done a thing – except enroll in Transitchek. She gets the same service, same ticket, same train, everything is the same – except she is $806.40 per year richer, for about 5 minutes worth of paperwork.