When determining the value of employer-provided parking, which valuation method is allowed?

The valuation method that is allowed for determining the value of employer-provided parking is the lower of the employee's cost or fair market value. This approach is consistent with IRS regulations, which stipulate that the taxable benefit for employer-provided parking should not exceed the lesser amount between what the employee would have to pay for similar parking services (the employee's cost) and the prevailing charges for such parking in the area (fair market value).

Using this method ensures that employees are not unfairly taxed on a benefit that they would not typically pay a premium for, reflecting a reasonable assessment of the value they are receiving. By prioritizing the lower value between the two, it promotes fairness in taxation and aligns with the intended tax treatment of fringe benefits, making it a compliant and logical choice for payroll professionals handling these calculations.