Whether you drive to work or take public transportation, it could get you a deduction on your Massachusetts tax return. For tax years starting with 2006, the commuter deduction allows taxpayers to take a deduction for tolls paid through a Fast Lane account or for weekly or monthly transit commuter passes for MBTA transit, bus, commuter rail or boat. But, this does not include amounts reimbursed by an employer or otherwise.
This deduction is allowed for amounts paid over $150 but cannot exceed $750. Transportation costs are deductible in different areas of a tax return, so you must choose which area you would prefer to receive the deduction, as you cannot use the same expense twice.
It is important to know that this is an individual deduction, so it is allowed for both a taxpayer and spouse, up to a total $750 each. But, an excess deduction cannot be transferred to the other spouse. This can also be used for a dependent’s commuting expense in place of one of the spouses. The maximum allowable is two individual deductions, or $1500 total.
If your commuting expense is paid by your employer and included in your W-2 as income, then there are different rules to calculating your allowable deduction. On your W-2, the amount of the pass that exceeds $105 is included in your income. You should exclude this amount from your calculating the cost of the pass, the remainder is the amount of qualifying expenses. The amount that is deductible must still be over the $150 threshold and cannot exceed the $750. If your commuting expense is paid by a payroll reduction out of your paycheck, then the entire amount is considered eligible expenses.
In order to verify the deduction, be sure to keep a record of the monthly passes or the FastLane reports, credit card or bank statements or paystubs, whichever is applicable to your situation. It is important to keep yourself informed about tax deductions that may be out there that will help you, check with your tax preparer today to find out!