Tax-free subsidies for local and long-distance public transport journeys
Since January 1, 2019, employer allowances for travel by public transport on scheduled routes (excluding air transport) between home and the first place of work (1st alternative) and for travel on local public transport (2nd alternative) have been exempt from income tax and social security contributions under Section 3 No. 15 of the German Income Tax Act (EStG) if they are paid in addition to the salary owed anyway; the same applies to the free or reduced-price use of such means of transport. These tax-free benefits reduce the deductible commuting allowance for employees.
Whereas in the 2nd alternative all journeys – including private journeys – on localpublic transport are eligible, the 1st alternative only applies to journeys between the home and the first place of work using regular public transport (meaning long-distance passenger transport). Insofar as the tickets subsidized or provided by the employer (e.g. monthly pass, annual pass, BahnCard 100) also enable purely private journeys, the non-cash benefit accruing thereon may be subject to tax and social security contributions.
In an application letter, the tax authorities comment on this in detail: The decisive factor for the allocation of subsidies for long-distance passenger travel is a forecast of the extent to which, for example, the BahnCard 100 provided “pays for itself” for the employer. The costs for business trips are included with the saved costs for individual tickets.