Last updated: May 26, 2026. Primary source: IRS Rev. Proc. 2025-32.

For 2026, the IRS sets the pretax commuter benefit limit at $340 per employee per month for transit and commuter highway vehicle / vanpool transportation, and $340 per employee per month for qualified parking. Both limits apply simultaneously, so an employee who commutes by transit and pays for parking can use up to $680 per month in pretax income.

Quick reference:

Eligible: transit, qualifying vanpool, qualified parking.

Not eligible: gas, tolls, standard rideshare, bike share, e-bikes, scooters, taxis, tickets, fines, or parking at home.

See the full list at Alice’s eligibility page.

The 2026 Numbers

Transit & commuter highway vehicle / vanpool: $340 per employee per month

Qualified parking: $340 per employee per month

Combined maximum (transit + parking): $680 per employee per month

In plain English: employees can use up to $340/month pretax for eligible transit or vanpool costs, and up to $340/month pretax for qualified parking.

How the Limit Has Changed Year by Year

Sources: IRS annual revenue procedures for each plan year.

The IRS announces each year’s limit in November as part of its annual inflation-adjustment revenue procedure. The limits are indexed annually — they do not move on a fixed schedule.

What Counts as Eligible Spending

The $340 transit limit covers transit passes and fares for subway, commuter rail, light rail, streetcar, bus, ferry, and vanpools that meet IRS commuter highway vehicle rules (vehicle seating at least six adults, excluding the driver, used primarily for employee commuting).

The $340 parking limit covers qualified parking near the employee’s principal place of work or a location from which the employee commutes by transit or vanpool: employer-owned and third-party parking garages and lots, street parking meters, and parking apps (SpotHero, ParkWhiz, etc.) for eligible parking locations.

For the full eligible/ineligible list, see Alice’s eligibility page or the help-center article.

Not eligible under Alice’s commuter program: gas or fuel; tolls (including E-ZPass, I-PASS, bridge and tunnel tolls); EV charging; parking at the employee’s home; parking tickets or fines; business travel; standard Uber or Lyft rides; taxis; bike share, e-bikes, and scooters; flights.

How the Employer Offers It

The employer offers commuter benefits as a pretax payroll election. The employee elects up to the IRS monthly maximum and uses those pretax dollars for eligible commute spending. Because the elected amount is excluded from gross wages:

• The employee avoids federal income tax, state income tax (in most states), and FICA on the elected amount. Most frontline workers save about 20% of what they spend on eligible commuting — actual savings depend on each person’s tax situation.
• The employer generally reduces payroll taxes on pretax commuter amounts. For wages below the Social Security wage base ($184,500 in 2026), employer FICA savings are typically 7.65% (6.2% Social Security + 1.45% Medicare). For wages above the wage base, the Social Security portion no longer applies, but Medicare savings continue.

This is not a reimbursement program or a benefit the employer funds out of pocket. The mechanism is pretax payroll — employees keep more of what they already earn. Alice is designed so employers do not pay more in Alice fees than they save in employer payroll taxes from the program (exact pricing depends on the employer agreement and program terms).

How Alice Handles the 2026 Limit Update

Alice updates program settings for the new IRS limit each November when the IRS publishes the new Revenue Procedure. No manual limit update or monthly deduction resizing on your end. Alice’s per-pay-period election model keeps each employee’s deductions within the monthly limit, even as schedules, locations, and paycheck sizes change.

Alice connects with 30+ payroll providers and was built specifically for the kinds of teams — restaurants, hotels, cafes, healthcare, retail — where traditional monthly commuter elections often break down. See how Alice works for restaurants and food service, hospitality teams, or healthcare teams. If you’re currently using a legacy platform, see how Alice compares to WageWorks or Alice compares to HealthEquity.

Alice is available for employers across the United States, including cities and states where commuter benefits are required by law — New York City (Local Law 53) and beyond.

Alice does not provide tax, legal, or financial advice. Consult a qualified advisor for guidance specific to your situation.

Get This Set Up for 2026

If employees have eligible transit, vanpool, or parking costs, the 2026 limit gives them more room to save pretax.

Contact sales@thisisalice.com or (929) 552-4625. We’ll get you onboarded in one call.

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