The new IRS bicycle commuter benefit went into effect January 1, 2009. The Bicycle Commuter Act is a tax incentive for both employers and employee bicycle-commuters, allowing employers to offer a benefit of up to $20 a month for those who regularly commute to work by bike.
The benefit is intended to offset the costs of bike commuting. Eligible expenses include such things as a new bike purchase, regular maintenance costs, and the purchase of such things as a bike helmet, lock, lights or other safety gear and for expenses like bike storage and parking. Employers need to establish their own system of how the program will work.
Options for the employer include: 1. a tax credit deduction for employees; 2. an actual reimbursement for expenses; or 3. a voucher system.
See IRS Publication 15-B (2009) at http://www.irs.gov/publications/p15b/ar02.html#en_US_publink1000101773 , “Employer’s Guide to Fringe Benefits” (section on De Minimis Transportation Benefits, and Qualified Transportation Benefits.)
Common questions: (summary below from the League of American Bicyclists, http://www.bikeleague.org/news/100708faq.php )
How Does This Work? Employees and employers save all income and payroll taxes on the amount of money provided for qualified fringe benefits for commuting: 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 Want to Provide this Benefit to Employees? 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? 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.
The Bike Michiana Coalition hopes to include info on this exciting new benefit to local businesses to encourage their employees to bicycle to work, as part of a corporate sponsorship package we’ll be rolling out this spring in conjunction with Bike to Work Week.