Pre-Tax Deduction Information
for Employee Parking Permits
University employees can elect to pay for parking charges through payroll deduction on a pre-tax basis (i.e., before federal, state, OASDI and HI tax withholding have been calculated). Transportation offers this opportunity to all NC State employees who pay for parking charges via payroll deduction. Pre-tax deductions are reflected in the monthly payroll.
The following are FAQ?s to help decide whether or not to select a pre-tax option:
What taxes are affected? Electing to have parking charges deducted on a pre-tax basis reduces federal, state, OASDI and HI taxable gross income, thereby reducing the amount of federal, state, OASDI (Social Security) and HI (Medicare) taxes withheld.
What does "pre-tax" mean? Pre-tax means the cost of the parking permit is deducted from gross wages before federal, state, OASDI and HI taxes are calculated and deducted. This should result in a greater net pay amount.
Can paying for parking charges on a pre-tax basis through payroll deduction have a negative impact on me? For employees who are close to retiring or are contributing to a 403b or 401K plan, a tax accountant could determine if electing to have parking charges deducted on a pre-tax basis could have a negative impact. Transportation cannot assist with tax and retirement information. Pre-tax deductions such as those for parking charges are one of the components of the formula used in determining the maximum amount that may be contributed to a 403b or 401K plan. A pre-tax parking deduction could reduce the amount that may be contributed to a 403b or 401K plan. The reduction in reported Social Security (OASDI) and Medicare (HI tax) taxable wages reduces the amount of Social Security and Medicare benefits an employee may be entitled to upon retirement.
Who at NC State University is eligible? Permanent full-time or part-time employees, who pay for a parking permit through payroll deduction are eligible to elect the parking permit deduction on a pre-tax basis. Employees who pay in cash, by credit card or by check may want to contact a tax accountant to see if the cost of the parking permit can be deducted as a business expense on income tax returns.
Can I change my tax election option after it has been initiated? Whether or not a parking permit is payroll deducted on a pre-tax basis may be changed when parking permit renewal is offered next spring for the following academic year. New employees will elect to pay for a parking permit on a pre-tax basis through payroll deduction at the time of hire when a parking permit is requested. Note: As is the case with health insurance, employees who elect parking permit deduction on a post-tax basis must renew that election annually.
What if I leave the university and return my parking permit prior to the end of the Academic School Year? Refunds of pre-tax parking permit deductions to separated employees will be generated by Transportation through the personnel/payroll system so that the deduction, taxes and taxable gross accumulators can be simultaneously adjusted. If you have not been paying for your permit on a pre-tax basis, Transportation will process the refund without an adjustment for taxes.
If you have any questions or need further information about the pre-tax program, please contact Transportation at 919-515-3424.