Bicycle Commuters Added to IRS Commuter Tax Benefit

The $700 billion bailout legislation, the federal Emergency Economic Stabilization Act, contains language that expands the Qualified Transportation Fringe Benefit program to individuals who commute to work on their bicycles.  The tax-code change takes effect in January 2009.

Under the program, employers may offer up to $20 a month to employees who ride their bikes to work.   The money would be used to defray costs of commuting such as equipment or maintenance expenses.  The benefit is offered to employees without increasing their taxable income and is a tax write-off to the employer.  The Internal Revenue Service has not yet announced the details of implementing the program.

Under Section 132(f) programs already in place for transit subsidies for instance, the employer deducts the benefits from the employee’s gross wages and then provides the employee with a transit pass.  These programs may be funded either entirely by the employer or the employee, or as a split contribution between the two.

Applying this to cycling could look something like this example.  The benefit offered may require the submission of receipts by the employee for reimbursement.  Or the employer may provide a voucher that is accepted at a bike shop.  Additionally, the IRS will have to determine other details, such as the minimum participation level required for eligibility (e.g. 80% of all commute days are by bicycle).

Some employers already offer incentives to their bicycling workers.  The University of South Florida shared this information.