Main Menu

Parking Tax Implications for Businesses


The Tax Cuts and Jobs Act (TCJA), passed in December 2017, changed the tax deductibility of qualified parking, one of the longest standing tax-free fringe benefits provided to employees. The new law states that no deduction is allowed for federal income tax purposes for “the expense of any qualified transportation fringe…provided to an employee of the taxpayer.” 

Historically, certain fringe benefits provided by employers are not treated as additional compensation to employees, yet have been deductible by the employers. Examples include accident and health benefits, certain achievement awards, benefits deemed to be de minimis (such as occasional snacks, non-cash holiday gifts, and personal use of a cell phone provided primarily for business purposes), and meals provided on the employer’s premises for the employer’s benefit. Qualified transportation/commuting expenses are another example of a non-taxable fringe benefit, to the extent the benefit does not exceed $265 per month ($260 for the 2018 tax year). Effective for years beginning after December 31, 2017, amounts paid or incurred by employers for qualified parking benefits provided to employees are no longer deductible. 

Noteworthy is that the TCJA did not change the treatment of the fringe to the employees. To the extent the benefit is less than $265 per month, the benefit remains tax free to employees. The corollary to that is that to the extent the benefit exceeds $265 per month, the benefit is no longer considered to be a qualified transportation fringe benefit. In these situations, the benefit is taxable to the employee and remains deductible by the employer. 

It should also be noted that this change also applies to tax-exempt organizations, which requires that Unrelated Business Taxable Income (UBTI) be increased by the amount of employee parking expenses that would be nondeductible if the organization were subject to the same rules as taxable organizations.

As there was scant guidance in the statute, the IRS issued Notice 2018-99 in late 2018 in an attempt to provide clarity to taxpayers. First, the interim guidance indicates that further guidance will be issued to help taxpayers navigate this area. Next, Notice 2018-99 provides that if the employer pays a third party so that employees may park there, the amounts paid are nondeductible (again subject to the $265 per month rule). 

In situations where employers own or lease all or a portion of a parking facility, whether in the form of a designated parking garage or a surface lot, employers are directed to first identify the number of spots allocated for employee parking. Spots specifically designated for customers or clients are not included.  Taxpayers are then directed to determine the ratio of employee parking spaces to total parking spaces and multiply that percentage by the cost of providing those spaces. 

Many times, however, leases do not explicitly break out the amount of the lease allocable to parking. As such, we have advised our clients to ascertain the cost of monthly parking spots in various areas of their communities and make certain assumptions based on different areas in that community. For example, the monthly cost of a parking spot downtown might cost $125 per month. In another business district in the same city it may cost $90 per month. Taxpayers in that city could compare relative lease rates between these different areas and apply those ratios to approximate the cost of parking in their specific area. 

We recognize that words like “assumptions” and “could” do not provide much added guidance to the readers of this piece. Fortunately, the Notice states that “any reasonable method” for determining the costs of parking spaces to employees will be deemed acceptable in advance of further guidance. As additional guidance is released, we will advise accordingly. 

For more information on tax reform’s impact on the taxation of qualified parking that businesses offer their employees, please contact Alan Fine, Tax Partner and Insurance Industry Group Leader, at 314.983.1292 or



Back to Page