Bicycle Commuter Tax Benefit FAQs

What is the Bicycle Commuter Tax Benefit?
The Bicycle Commuter benefit allows employers to offer a fringe benefit of $20 (tax-free) per month for employees for the purchase of a bicycle and any bicycle improvements, repairs, or storage costs, if the employee regularly uses the bicycle for a substantial portion of the travel to and from work and does not receive any other transportation fringe benefit, such as transit or parking benefits.

Employees and employers save all income and payroll taxes on the amount of money provided for qualified transportation fringe benefits for commuting - in the case of the bike provision, up to $20 per month ($240 per year).

This provision was signed into law under Section 132 of the federal tax code as the “Transportation Fringe Benefit to Bicycle Commuters,” and offers bicycle commuters similar tax benefits as people who get tax breaks for taking transit or driving their cars to and from work. This legislation was in front of Congress for seven years as part of a larger Renewable Energy Tax Credit legislation and was passed as a provision of the Financial Rescue Package in October, 2008. Read legislation

When does the Bicycle Commuter Benefit go into effect?
The bike commuter benefit can be provided by employers beginning January 1, 2009

How does the Bicycle Commuter Benefit work?
For employees who regularly commute to work by bicycle, employers may offset the costs of bicycle purchase, improvement, repair, and storage at the rate of $20 per month. Based on how the employer chooses to offer the benefits, the employee may bring receipts to be reimbursed, may sign up for regular monthly payments, or devise some sort of voucher system with their employer. Bike commuters are not allowed to receive transit or parking benefits in addition to the bike benefit.

What costs are covered?
Purchase of a bicycle; bike lock; helmet; bike parking facilities; shower facilities; and general maintenance.

How much do employers and employees save?
Employees and employers save all income and payroll taxes on the amount of money provided for qualified transportation fringe benefits for commuting. In the case of the bike provision up to $20 per month ($240 per year) can be provided tax-free for bike commuting. Due to the tax savings, employees can save in annual commuting costs, while employers save on Federal and State income taxes; Social Security (FICA) taxes paid by both employers and employees, and unemployment, disability, workman's compensation and retirement costs driven by salary.

Who can participate? Are any employers too large or too small for the program?
All types of employers from single person offices to large businesses with multiple locations and from every industry category in the private, public and non-profit sectors have the option to offer qualified transportation fringe benefit to their employees.

Sources:
http://www.bikeleague.org/news/100708faq.php (League of American Bicyclists)
http://blumenauer.house.gov (Congressman Earl Blumenauer’s Biking Legislation webpage)