The American Taxpayer Relief Act of 2012, passed by Congress this January 1, included some substantial good news for employees whose employers supplement their public transportation expense.
For 2013, an employer can provide a TAX FREE stipend of up to $245 per month to the nanny or housekeeper for commuting on public transportation. This MUST be used for bus, subway, commuter rail or other public transportation - NOT for gas and tolls to commute in a private automobile.
The 2012 maximum monthly stipend increased retroactively from $125 to $240 per month in the same legislation.
If you are a household employee who uses public transportation, this is a win-win for both you and your employer. This should be a consideration in any compensation discussions between the employer and employee. Taxable income could be traded for this non-taxable benefit, saving the employee as much as $500 or more in taxes over the year.
We have a tip sheet Negotiating Nanny Compensation and Benefits that contains more valuable information.