New Jersey motorists who travel into Manhattan’s most congested zone on a regular basis – and are now paying a premium to do so — should take a new look at a federal tax break for mass-transit commuters.
That’s one message from a recent analysis published by the Regional Plan Association, a nonpartisan group that’s based in New York City, where “congestion pricing” tolls for motorists entering the central business district went into effect early last year.
Those extra tolls have upset many motorists in New Jersey who drive into Manhattan for work, school or other reasons. Tax experts have described the congestion toll as equal parts user fee and behavior influencer. It raises funds for the Metropolitan Transportation Authority, which runs the city’s subways and buses, and is intended to reduce traffic and pollution.
The RPA report, though, highlights how motorists can avoid paying the extra charges by using mass transit, all while enjoying a federal tax benefit that functions almost as a reverse congestion toll by reducing a commuter’s taxable income.
The report’s release comes at a key moment for New Jersey’s Manhattan-bound commuters, coinciding with the ongoing transfer of a final track needed to bring online the new Portal North Bridge over the Hackensack River near Secaucus Junction.
The long-planned bridge-replacement project is disrupting service on many lines through mid-November, but officials have described this work as short-term pain that will result in long-term capacity and reliability improvements.
The tax break for mass-transit commuters is written into a section of the federal tax code that says a mass-transit commuter can set aside as much as $340 a month as pre-tax income to spend on bus and rail fares. For those not familiar with IRS fine print, this allows commuters taking mass transit instead of driving to essentially get more bang for their buck.
“Your dollar’s worth more,” said Rachel Weinberger, a co-author of the RPA report (opens in new tab), in a recent interview with NJ Spotlight News.
“Instead of paying out of pocket for your gas, and your tolls, and the maintenance on your car, you’re actually getting, basically, a 30% discount,” Weinberger said, using a common tax bracket for many of New Jersey’s Manhattan-bound commuters.
In all, the report estimates New Jersey mass-transit commuters traveling regularly into lower and central Manhattan are generally saving more than $75 million annually just by using the federal tax benefit.
For individuals, the savings range from $400 to $1,300, the report said, with the largest share going to New Jersey’s suburban commuters who typically spend more on their commutes than those in more urban regions.
“That’s a lot of restaurant [meals] out, that’s some new shoes for your kid, that’s not nothing,” Weinberger said of the individual savings.
Federal policymakers created the tax benefit for commuting expenses in the 1990s as part of broader efforts to address concerns about traffic congestion and air quality.
In New Jersey, state lawmakers went a step further by adopting a law in 2019 that requires businesses with 20 or more employees to offer their workers a pre-tax transportation fringe benefit, which many now use as a credit card loaded with untaxed income to cover their bus and rail fares.
The RPA — a longtime supporter of congestion pricing — analyzed the impact of the mass-transit tax benefit on Manhattan’s central business district, where passenger cars began being charged tolls of $9 during peak hours in early 2025.
To do so, the report’s authors imagined the conditions that would arise if the mass-transit tax break were abolished.
Among the RPA report’s key findings were estimates of how many more personal motor vehicles would be driven into the congestion zone on an average weekday if the commuting tax benefit went away. That would be anywhere from 6,200 to 11,100 more personal motor vehicles, the report said.
Another section of the analysis looked at ways non-commuters are also benefiting from the tax break thanks to those who are currently using it.
This included envisioning the impact of mass-transit commuters who would become motorists if they were to lose the tax benefit and were instead flooding area roadways. Taken together, they would add up to 3.8 million in additional hours of “motorists delay” across the entire New York-New Jersey metropolitan region, the analysis found.
“The cost of these travel delays would range between $110 million and $190 million for motorists alone, let alone the costs of worsened travel times for people walking, riding bicycles, or using public transportation, in addition to the costs of worsened air quality borne by everyone,” the report said.
Meanwhile, there would also be consequences for New Jersey Transit. The statewide bus and rail agency provides many mass-transit commuters in New Jersey with a way to travel directly into Manhattan’s congestion zone. The analysis estimated NJ Transit would lose between $2.8 million and $4.3 million in annual revenue if a measurable share of current mass-transit commuters chose to instead take their cars into Manhattan.
The Port Authority of New York and New Jersey, which also operates a train service linking parts of New Jersey with Manhattan, could lose up to $1.2 million annually, according to the analysis.
Despite the tax benefits popularity among commuters, transportation advocates warn elimination of the benefit for employees has come up for discussion in Washington and could again, depending on how the political winds blow.
Moreover, a 2017 federal tax law Congress passed during President Trump’s first term repealed an employer’s ability to deduct their costs for providing commuter benefits to their workers, including for transit.
Bipartisan legislation (opens in new tab) introduced in the U.S. House of Representatives and cosponsored by New Jersey’s Rep. Bonnie Watson Coleman (D-12th) would restore the employer deduction, but it has not made it out of the Committee on Ways and Means, the chamber’s powerful tax-writing panel. Watson Coleman is retiring at the end of her term.
Both chambers of the current Republican-majority Congress adjourned in late September, and neither is scheduled to return until mid-November, the week after Election Day.
Speaking about the transit benefit for employees, Tom Wright, the RPA’s president and chief executive officer, said “it may seem like a relatively small incentive, but this analysis shows that its impact extends far beyond the commuters who use it.”
“It supports our transit systems, keeps cars off already-congested roads, and delivers benefits to millions of people across the region,” he said.
— Benjamin J. Hulac contributed to this report.