Benefits of Payroll Deduction

Benefits of Payroll Deduction

The cost of a Harvard parking permit can be reduced by up to 35% if it is paid for through automatic payroll deduction. The Internal Revenue Service allows employers to exclude the cost of parking for eligible commuting Faculty & Staff from state and federal payroll taxes. This means that when you use payroll deduction your Harvard parking permit fee is subtracted from your gross earnings before taxes are applied. This is similar to other tax-deferred deductions such as medical insurance and 403b investment plans. Depending on your income tax bracket, this results in net savings of up to 35% off the cost of your parking. The IRS pre-tax limit for 2017 remains at $255.00 a month.

For example, a staff member purchases a yearly unreserved surface parking permit through payroll deduction.

Although the annual permit fee is $2,136.00, this amount is deducted before payroll taxes. Thus, the net cost will be approximately $1,388.00 - a tax savings of $748.00!

Please refer to the following table for examples of how pre-tax savings compares with net cost.

Pre-Tax Savings Table

Permit Type
FY18 Annual Rate
Estimated Net Cost w/Payroll Deduction

Reserved Garage
$ 4,284.00
$ 3,213.00

Reserved Surface
$ 4,032.00
$ 2,961.00

Unreserved Garage
$ 2,280.00
$ 1,482.00

Unreserved Surface
$ 2,136.00
$ 1,388.00


Other benefits to choosing payroll deduction include:

  • Payroll deductions are spread over 11 months for most commuters renewing online. Reserved permit holders will receive deductions over 12 months.
  • The FY18 cost of parking for most commuters choosing payroll deduction will be approximately $5.51 to $5.88 per day (average 21 working days a month).


Please note: Employees whose parking fees are payroll deducted are subject to IRS pre-tax regulations that generally prohibit refunds. We strongly encourage employees to give at least two weeks’ notice before cancelling parking privileges.

    Visiting the Parking Office

    For information about visiting the parking office, click here.