The bicycle commuting reimbursement was added to the tax code five years ago, in 2009, yet its application has been limited. The tax benefit allows for bike commuters to collect a $20 pre-tax payment from their employers, which can be used toward qualified expenses. According to the IRS, “reasonable expenses” include the purchase of a bike, repairs, improvements and storage; clothing is excluded, and “These are considered reasonable expenses as long as the bicycle is regularly used for travel between the employee’s residence and place of employment.”
A company must choose to offer this benefit to their employees just like any other transportation benefit. Employers benefit by getting a tax deduction for the reimbursement and save in employee pay by providing the same value with less money than through normal wages. As pre-tax dollars, the money can go further in paying for commuting costs than $20 out of a paycheck.
“Let’s say your employer gave you $60 extra a month on your salary–a big chunk of that for most people would go to pay taxes, but because it’s an added benefit it’s not included as part of your salary,” ” says Torre St. Saviour, marketing manager at Commuter Check, a commuter benefit service for businesses. “This way they’re actually able to get the money directly to you without having to change your tax bracket or change how much you pay in taxes.”
Small businesses and companies with few cyclists on their payroll may be reluctant to do the work required, involving processing receipts and deductions to employee paychecks, but there a number of ways to offer to benefit that simplify its implementation. The benefit may be administered by a benefit administrator such as Commuter Check, or by a third party payroll agency, or in-house. Commuter Check issues vouchers to employees, which are redeemable at partner bike shops.