The League of American Bicyclists now has a page for the Bicycle Commuter Tax Provision. The IRS recently published Publication 15-B which includes the rules for the Bicycle Commuter Benefit. Go below the rules on LAB's page for the FAQ. I'll try to summarize as best I can.
Fringe benefits are taxable (such as getting free rides in limousines, Tom Daschle) unless they are excluded by law. The bicycle commuter act passed last year excluded bike commuter benefits from an employee's taxable pay, up to $20 a month. However, if you receive the $20 bicycle commuter benefit, you can not receive any other transportation benefit such as commuter highway vehicle, transit pass, or qualified parking benefits in that same month. This is different than with transit and parking. If you want to, you can take the $230 transit benefit AND $230 in parking. But for cyclists, you can either have $20 for biking or up to $430 for using transit and driving (sigh).
Bicycle benefits can be used to replace reasonable expenses such as the purchase of, repairs to, and storage of a bicycle as long as that bicycle is regularly used to commute.
You have to be a regular employee, and use your bike for a substantial portion of travel.
Employers can give you more than $20 a month, but you have to pay taxes on everything above $20.
Bicycle commuter benefits also differ from transit benefits in that they can only be excluded if they're employer-paid. For transit benefits they can be employer-paid or employee-paid. In the second case, the employee buys transit with pre-tax dollars, similar to the way they fund a 401k or contribute to a health care savings accounts. This is not possible for bike commuters. As such, this reduces the utility of the benefit still further as employee-paid benefits help employees - by allowing them to pay for transportation with pretax dollars - and employers - by reducing payroll taxes. So only employees who's employers are willing to pay them extra will be able to deduct the benefit. (double sigh) [The Active Transportation Alliance reads this the way I do, but Accor does not.]
To help employers who are interested in giving the benefit, Accor Services is offering the commuter check for bicycling. This allows employers to buy commuter vouchers and issue them to employees just like they would for transit. "Vouchers are redeemable at dedicated bicycle shops and bicycle parking and storage locations across the country." As FABB points out, the only "dedicated bicycle shops" (Excel file) listed in the area are REIs.
So there's a long way to go before people start taking advantage of this in large numbers.
However, Earl Blumenauer just introduced HR 863, The Bicycle Commuter Choice Act, which will allow employees to receive transportation fringe benefits for the same month both in the form of transit passes and reimbursement of bicycle commuting expenses, and it would be retroactive to this year.
So that takes care of one problem, but they also need to deal with the lack of employee-paid benefits. (Does anyone know what percentage of transit benefits are employee-paid and what percentage is employer-paid?)
In the meantime, go and harass your boss for this. I don't get transit benefits from my employer, but I do get a taxable gym fee fringe benefit of $500 a year. I'm going to try and convince them to let me take either that benefit or a $500 a year bike commuter benefit (of which $480 $240 would be tax free). Let's see if that gets anywhere.
This is still really weird. I cancelled my parking and save my employer about $130/ month. I save $100 for parking (pre-tax) but I need to pay $40 for the gym which I would not pay if I continued to drive my car.
As I said some time ago in some other comments, allowing up to $230 for parking expenses is counter-productive since it subsidizes profits of parking garage operators.
I would be happy with a fully reimbursed gym membership and a flat payment once or twice a year to be used for bike maintenance or equipment purchase.
Even if the flat payment(s) amounts to $300, my emplyer would still only pay half of what bthey pay for the parking garage subsidy (in this case $780).
I also have a question: How did you come up with $480 tax free? Wouldn't it be $240, i.e. 12 x $20?
Posted by: Eric_W. | March 26, 2009 at 09:20 AM
This benefit like a painted bike lane is mostly symbolic. I don't think I any of the my 15 current and former employers would give me 20 bucks a month to ride a bike. To their defense, none of them ever gave me any money to drive or take the bus to work either.
Posted by: Tom | March 26, 2009 at 09:29 AM
This is interesting, and makes the benefit (as it currently stands) virtually worthless. It sabotages multi-modal transit (e.g. bike+rail) and excludes the vast number of employers who will be unwilling to add a benefit that they need to pay for.
Inevitably, tax policy is structured with an eye to the impact on tax revenue. (We can't create too many environmentally friendly tax incentives, or we'll lose revenue. Never mind the effect on the planet!) I suspect something like that is going on here. By making the bicycle benefit exclusive of other transit benefits, small, and employer-paid the government makes sure that it will not have a negative impact on revenue. Of course, by the token, it is unlikely to have much an impact.
Posted by: guez | March 26, 2009 at 10:18 AM
guez,
I agree with you. However, at the same time they increased the public transit benefit from $130 (or whatever it was before) to $230 but left the parking benefit at $230. They should ahve switched those two around and that would ahve created a marked spike in the use of the transit subsidy, I believe.
In the end, I think people begrudge anyone who is walking to work or bicycling to work and want to make sure that this group of people do not receive any rewards for their behavior.
After all, the walkers always jawalk and the bikers always run red lights.
Posted by: Eric_W. | March 26, 2009 at 10:51 AM
Makes me think of the current transit allowance/ subsidy from the US gov't- basically- as it stands- the farther you live from work, the more money they give you to take transit.
The best thing to do for the good of everyone would be to reward those who live closest to their jobs with more allowance.
Posted by: w | March 26, 2009 at 12:34 PM
I don't think this benefit is worth the lobbying done to achieve it. It's too small an amount and it sounds like a hassle to get the deduction. Maybe they could just give employers incentives to provide showers, or an increase to the Transportation Enhancements program that funds bike/ped projects in the U.S. Is the $20 limit the amount of expense that's deductable or the actual deduction (tax savings)?
Posted by: Jack | March 26, 2009 at 04:55 PM
Jack,
Based on the description above, the benefit is employer-paid only, so $20 is the amount of the expense. (The employee can't deduct anything since s/he didn't pay.)
Posted by: guez | March 26, 2009 at 10:57 PM
This information has been on the LAB site for quite a while. Is there new information that was recently posted that clarifies implementation of the benefit?
Posted by: Bruce Wright | March 27, 2009 at 11:16 AM
One of the benefits of working as an independent contractor is that you can write off *all* your commuting expenses, since it's a legitimate expense for your "business." I do commute to client's offices by bike, but 'm not sure I want to be a pioneer in claiming bike expenses!
Posted by: SC Cyclist | March 27, 2009 at 12:54 PM
Can I ask my employer to qualify $20 of my paycheck as a fringe benefit instead of asking for a $20 a month raise?
It would make sense for employers to take advantage too, because that $20 is free of SS and Medicare payments which they pay equally with the employees.
Posted by: GeorgeM | June 30, 2009 at 02:41 PM
Yes you can ask and they can do it. But not if you get any other transit benefit. (my employer has not jumped at the chance yet, but they did say they were investigating - it's hard to turn a big boat, and I work for a big company)
Posted by: Washcycle | June 30, 2009 at 03:44 PM