I. Introduction

Effective for tax years beginning on or after January 1, 2006, the Massachusetts Legislature reenacted and codified a personal income tax deduction for certain commuter expenses. [1] See G.L. c. 62, § 3(B)(a)(15), as added by St. 2006, c. 139, §§ 42, 131. This Technical Information Release explains the requirements that must be met for a taxpayer to qualify for the commuter deduction.

II. Discussion

General Laws chapter 62, § 3(B)(a)(15) provides a deduction for individuals against Part B Income for:

Amounts expended by an individual for tolls paid for through a Fast Lane account or for weekly or monthly transit commuter passes for Massachusetts Bay Transit Authority transit, bus, commuter rail or commuter boat, not including amounts reimbursed by an employer or otherwise. In the case of a single person or a married person filing a separate return or a head of household, this deduction shall apply only to the portion of the expended amount that exceeds $150, and the total amount deducted shall not exceed $750. In the case of a married couple filing a joint return, this deduction shall apply only to the portion of the amount expended by each individual that exceeds $150, and the total amount deducted shall not exceed $750 for each individual.

1. MBTA Passes eligible for the Commuter Deduction. Any MBTA commuter pass or Charlie Ticket that is designated to be a monthly or weekly pass is eligible for the commuter deduction. The MBTA commuter rail "Twelve-Ride" pass and the MBTA express bus or commuter boat "Ten-Ride" passes qualify as weekly passes eligible for the commuter deduction. However, a "Stored-Value" Charlie Ticket does not qualify for the commuter deduction. [2]

2. Double Tax Benefits Not Allowed. The new commuter deduction is allowable only if the amount is not otherwise deducted. Where transportation costs are deductible both under G.L. c. 62, § 3(B)(a)(15) and any other provision of law, the same expenses cannot be deducted twice.

3. Married Filing Jointly. In the case of married taxpayers filing jointly, each spouse is limited to his or her own commuter costs not to exceed a deduction of $750 per individual. One spouse cannot transfer his or her excess deduction to the other spouse.

4. Employer Provided Pass. For tax year 2006, where an employer pays for an MBTA pass, the amount by which the value of the pass exceeds $105 a month is included in the employee's income, and reported as wages on Form W-2. [3] To calculate the commuter deduction in these circumstances, first deduct $105 a month or $1,260 a year from the cost of the pass; the remainder is the amount of the qualifying expenses. The amount of the commuter deduction is the portion of the qualifying expenses that exceeds $150, and the total amount deducted cannot exceed $750.

5. Employee Payment by Payroll Reduction. Where an employee pays for an MBTA pass through payroll reduction, the total cost of the pass is eligible for the Massachusetts deduction, assuming all other requirements are met.

6. Dependents. The deduction is allowed where an individual purchases an MBTA pass for a dependent who is claimed on that individual's tax return, provided the dependent does not also claim the deduction. However, the total amount deducted cannot exceed $750 for each individual taxpayer who is filing a return. In the case of married taxpayers filing a joint return, the total amount deducted cannot exceed $750 per taxpayer; thus, the maximum deduction for a joint return is $1,500.

7. Recordkeeping. Monthly passes, FastLane reports, credit card statements, bank statements, pay stubs, and similar records will serve to substantiate this deduction.

 

/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue
 

AL:MTF:adh

October 3, 2006

TIR 06-14



[1] For tax year 2004, a similar commuter deduction was allowed under the provisions of St. 2004, c. 352, § 165. See TIR 04-25, Effect of Recent Legislation on the Personal Income Tax, Withholding of Tax, and the Declaration of Estimated Tax by Individuals.

[2] Stored-value Charlie Tickets are sold by the MBTA to replace payment by tokens or cash.

A stored-value Charlie Ticket will have the fare deducted from it each time a patron rides the subway or bus.

[3] For tax year 2006, Massachusetts adopts the federal exclusion at Internal Revenue Code § 132(f) of $105 per month for employer-provided vanpool and transit pass benefits combined, including transit pass and employer-provided vanpool benefits that are a reduction in salary. For future tax years, the amount of the federal exclusion is subject to change.