New federal tax law delivers benefits changes — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

When President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 late last year, preservation of current tax rates and a one-year Social Security tax cut got all the headlines. But tucked into the broad statute were several provisions affecting employee benefits.

Tuition reimbursement: The new law extended tax breaks for employer-paid tuition reimbursement. Employees can continue to receive up to $5,250 tax-free from an employer plan to pay for qualified higher-education expenses, including graduate school tuition.

This tax exclusion was scheduled to expire after 2010. Now it’s extended through 2012.

Commuter benefits: The law extended tax-free commuting benefits designed to encourage employees to use mass transit to get to work. The maximum benefit for monthly transit passes was recently increased from $120 to $230 for the 2010 tax year, and the new law preserves that amount through the end of 2011.

The same benefit can also pay for van pooling and employer-provided parking.

On-site child care: The new law extends a 25% tax credit employers may take for qualified expenses (up to $100,000 per year) related to providing child care facilities to employees. An extra 10% credit is allowed for child care resource and referral services. The tax credit applies through the 2012 tax year.

Note on Social Security taxes: The law lowered employees’ share of Social Security withholding to 4.2% (from 6.2%) for 2011. Because the new law was enacted so late in 2010—on Dec. 17—it may take a couple of payroll cycles for the new withholding rate to show up in paychecks. Check with your payroll provider or accounting staff to find out when the change will be fully implemented.

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