When valuing employer-provided parking, which method is allowed?

• A. Employee's cost
• B. Fair market value
• C. Lower of employee's cost or fair market value
• D. Employer's cost

Answer: (B)

Valuing employer-provided parking by its fair market value ensures the benefit is measured by what the space would actually be worth in the open market, for similar circumstances and location. This reflects the real economic value to the employee, regardless of any discounts the employee might receive or any costs the employer incurs. If you used the employee’s cost, you could understate the benefit when parking is subsidized or free, and using the employer’s cost ties the value to internal expenses rather than market conditions. The “lower of” approach introduces inconsistency and isn’t the standard method for parking benefits. Therefore, the appropriate approach is to use the fair market value of the parking.