If you ride your bike to work or are thinking of doing so – be it for your health, to save money, as a hobby, or any other reason – you may be able pick up a tax break along the way. As of January 1 of this year, qualified bicycle commuting reimbursements of up to $20 per month (a total of $240 a year) are eligible for income exclusion, alongside qualified parking and highway vehicle transportation and transit passes. That is, your employer can reimburse you for “reasonable expenses,” including bicycle purchase, improvement, repair, and storage, and the value will not be reported in your income, up to $20 times the number of months for which you are eligible for this benefit.
To receive this benefit you cannot receive any other qualified transportation fringe benefit on the same month. It is ok, however, to receive different transportation fringe benefits throughout the year, such as a bicycle commuting reimbursement during the summer and a parking reimbursement in colder months. To qualify for the bicycle commuting reimbursement exclusion on a given month, you must “use the bicycle regularly for a substantial portion of the travel between your residence and place of employment”. The terms “regularly” and “substantial portion” are not explicitly defined anywhere in the Emergency Economic Stabilization Act of 2008 through which it was passed or in IRS documents, however.
But here’s the catch: unlike the other two qualified transportation fringe benefits, employees cannot choose to receive the benefit through pre-tax contributions [though a bill (H.R. 863) was proposed in February to change that]. Either your employer reimburses you or it does not. It may be in its interest to reimburse you, though, as a lower income reported for you means lower taxes for it, too.
Let your employer know if you want this benefit. To learn more and get information for your employer on how to set up a commuter solution for bike riders, visit The League of American Bicyclists’ webpage on the initiative.
Filed under: health, taxes, transportation, work Tagged: | bicycle, biking to work, commuting, emergency economic stabilization act, hr benefits, qbcr, qualified bicycle commuting reimbursements, transportation fringe benefits