$240/yr Provision from IRS for Biking to Work!
Bicycle Commuter Tax Provision:
IRS Direction On Qualified Transportation Benefits: Fringe Benefit Exclusion Rules
Source: IRS Publication 15-B (2009), Employer’s Tax Guide to Fringe Benefits
Basically, the IRS wants to give your employer a tax credit to give you $20/mo to commute to work on a bicycle. That’s sweet!
Cash Reimbursement:
Additionally, if employers choose to do so, they can provide the benefit through a cash reimbursement method. Under this scenario the employer would reimburse the employees for cash outlay for costs associated with their monthly bike commute. The reimbursement would be for up to the $20 maximum monthly amount and the $20 would come from the cooperating employer.
- $20 per qualified bicycle commuting month.
Qualified bicycle commuting month: For any employee, a qualified bicycle commuting month is any month the employee:
- Regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment and
- Does not receive:
- Transportation in a commuter highway vehicle,
- Any transit pass, or
- Qualified parking benefits.
When does the bill become effective?
Effective Date –Tax year beginning January 1, 2009
How does the program work?
The original intent was that an employer could now provide up to $20 a month in incentives related to an employee’s bike commuting, to include, but not limited to, bike parking facilities, shower facilities, and maintenance then deduct that amount from their taxable income. Again, we will work with IRS to establish more guidance for interested employers.
Why was the bicycle commuter act part of the financial rescue package?
The bike provision was part of a larger Renewable Energy Tax Credit Initiatives legislation. Varying versions had passed both the House and Senate but the two houses were unable to compromise on one version.
If I put my bike on a bus/train for part of my commute, can I still get the benefit?
At this time, the language would preclude one from obtaining both a transit pass benefit and a bicycle commuting benefit, but this is something that the League will be looking to rectify in the next surface transportation reauthorization in regards to expanding access to transit.
Who made this happen?
Congressman Earl Blumenauer (D-OR) and Senator Ron Wyden (D-OR) have been the Congressional champions for legislation that would provide tax fairness so employers could offer the same transportation fringe benefits for bicyclists that they offer to employees who commute by car and public transit for a number.
Why is the benefit only $20/month when transit users get $115 and car parkers $210 each month?
Proponents of the measure certainly wish it was higher; in fact, the initial request was for an $80 a month benefit which was approximately 25 percent below the transit benefit, which is set at $115. However, many Congressional Members had concerns about the program in general and specifically with the $80. Ultimately, the $20 per month figure was the result of compromise to enable the provision to move forward.
What costs are covered?
Most of the costs associated with commuting by bike are fixed and are barely affected by the daily distance covered. The intent of this provision is to help defray some of those fixed costs such as; the purchase of a decent commuter 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.
Why Would An Employer Provide Qualified Transportation Benefits such as the Bicycling Benefit?
Employers sensitive to tax savings, employee morale, improved recruitment and reduced turnover are prominent fringe benefit providers. They have found that it enhances their benefits package without increasing overall compensation costs. Employers reduce FICA and other payroll-related costs to subsidize employee commuting costs. Since it is extremely popular with employees, it is an effective way for firms to indicate their concern for the environment. Employers that provide transportation fringe benefits have noted reduced stress from not driving, increased job satisfaction, improved on-time arrival and enhanced productivity. It also keeps an employer’s benefits package competitive.
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.
Original Article: http://www.bikeleague.org/news/100708faq.php