Parking Pricing

Parking Cash Out

Parking Cash Out allows employers to offer its employees the option of receiving taxable cash (up to $175 in value) in lieu of any parking subsidy offered. In most cases, employers offer their employees the cash value of a rented parking space in lieu of the space itself. Employees may deny the cash and keep the tax-free parking subsidy or accept tax-free transit or vanpooling benefits (up to $65 per month) in its place—with any balance in taxable cash. If an employee does accept the cash option, the cash is subject to income taxes for that employee creating an increase in payroll taxes for his or her employer. However, both parties ultimately benefit from implementing parking cash-out: employees' income rises while employers' business expenses decrease from not having to subsidize as much parking.

Parking Cash Out works best for employers that lease their parking separately from the office space and for those that can (1) let go of unused parking without penalty from the lessor, (2) rent that parking to an outside party for an equal or greater price, or (3) convert it into revenue producing space. Therefore, the employer takes any revenue, or simply leases fewer spaces, and transfers the money directly to employees who do not use the parking subsidy. It can be profitable, and/or it can save the employer or the city money by helping to avoid expensive new parking construction. Parking Cash Out also works best in areas where transit is accessible -- most likely urban areas -- or, where employees are willing to carpool, vanpool, telecommute, or bike/walk. For example, with a four person carpool, three employees could cash out their spaces while maintaining a free ride to work. If each space the employer provided was worth $80 per month, the four carpoolers would each get an extra $60 a month in taxable income ($80*3=$240; $240/4=$60). Then, they would drive to work together and park in the fourth space at no additional cost.

For example, Santa Monica has set a mandatory Parking Cash Out program. The program applies to businesses with 50 or more employees and with at least one work site located in California's South Coast Air Basin who (a) do not own their own parking (normally this means parking is leased), (b) subsidize employee parking (i.e., pay all or part of the cost of parking for any employee), (c) can calculate the out-of-pocket amount paid for subsidized employee parking (e.g., parking costs are unbundled, or separated in the lease agreement), and (d) can reduce the number of parking spaces leased without penalty (e.g., without having to break the lease or pay for unused spaces). Such employers are required to offer all eligible employees the option -in lieu of subsidized parking -of a cash allowance equivalent to the parking subsidy. Eligible employees are those to whom a subsidized parking space is available, even if not used. The parking subsidy is equal to the out-of-pocket amount paid by the employer for employee parking minus any contribution by the employee and minus any commute-related subsidies otherwise given to the employee (e.g., for mass transit or ridesharing). Employees have the choice of foregoing the cash offer and continuing to receive subsidized parking or accepting the offer and either paying for parking themselves or finding an alternative way to commute to work. Santa Monica recognizes Parking Cash Out for its contribution to overall trip reduction and to the emissions reduction requirements of the areas Clean Air laws.

For more information, contact Allen Greenberg, Federal Highway Administration Office of Policy, at 202-366-2425 or email: allen.greenberg@dot.gov.