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Everything you want to know about the new bike commuter tax provision

Posted by Jonathan Maus (Publisher/Editor) on October 7th, 2008 at 9:13 pm

[Via BikingBis.com]

After news broke about the passage of the bike commuter tax provision in the recent financial bailout bill, many commenters had questions about how it would work.

To help answer those questions, the League of American Bicyclists has published a list of Frequently Asked Questions. I've pasted excerpts from each question below:

When does the bill become effective?

Effective Date –Tax year beginning January 1, 2009


I am a bicycle commuter: how and where do I apply?

...the bicycle commuter provision is a fringe benefit, so your employer will still have to set up a process to administer the benefit that works for your organization.


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...


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.

The Senate strategically attached a number of provisions to the Financial Rescue Package to ensure their passage before recess...


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...


Who made this happen?

Congressman Earl Blumenauer (D-OR) and Senator Ron Wyden (D-OR)...


See the full answers at BikeLeague.org.

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Comments
  • John Russell October 7, 2008 at 10:28 pm

    Just to be clear, Blumenauer supported the bike commuter tax provision, just not its inclusion the new pork-laden bailout bill.

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  • Mark Allyn October 8, 2008 at 5:03 am

    What about the self employed?

    Luv

    Cleara

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  • eileen October 8, 2008 at 5:33 am

    Cleara, I'm not a lawyer, but I would think you could just deduct $20 a month from your taxable income for your bike commuting. I mean, if you are self-employed, you would be responsible for whatever the employer is responsible for, right?

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  • joel October 8, 2008 at 6:21 am

    sweet.

    now, in fantasy world, i could take that $20/mo deduction (for 1 hour/day of round-trip commuting to work, tops), and then wonder if i can then get deductions for the remaining 9 hours/day i continue to ride my bike around, which should net me an additional $180/mo tax deduction, for a total of $200/mo! awesome! too bad its fantasy world.

    someday ill be able to legitimately deduct food as fuel, like my fellow bike messengers in canada can. this is a decent start, though.

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  • Cameron October 8, 2008 at 8:07 am

    In case you want to know:

    Section 211 of the Senate Bailout bill states:

    “(a) In General- Paragraph (1) of section 132(f) is amended by adding at the end the following:
    `(D) Any qualified bicycle commuting reimbursement.’.

    (b) Limitation on Exclusion- Paragraph (2) of section 132(f) is amended by striking `and’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting `, and’, and by adding at the end the following new subparagraph:

    `(C) the applicable annual limitation in the case of any qualified bicycle commuting reimbursement.’.

    (c) Definitions- Paragraph (5) of section 132(f) is amended by adding at the end the following:

    `(F) DEFINITIONS RELATED TO BICYCLE COMMUTING REIMBURSEMENT-

    `(i) QUALIFIED BICYCLE COMMUTING REIMBURSEMENT- The term `qualified bicycle commuting reimbursement’ means, with respect to any calendar year, any employer reimbursement during the 15-month period beginning with the first day of such calendar year for reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee’s residence and place of employment.
    `(ii) APPLICABLE ANNUAL LIMITATION- The term `applicable annual limitation’ means, with respect to any employee for any calendar year, the product of $20 multiplied by the number of qualified bicycle commuting months during such year.

    `(iii) QUALIFIED BICYCLE COMMUTING MONTH- The term `qualified bicycle commuting month’ means, with respect to any employee, any month during which such employee–

    `(I) regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment, and
    `(II) does not receive any benefit described in subparagraph (A), (B), or (C) of paragraph (1).’.

    (d) Constructive Receipt of Benefit- Paragraph (4) of section 132(f) is amended by inserting `(other than a qualified bicycle commuting reimbursement)’ after `qualified transportation fringe’.

    (e) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2008.”

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  • K'Tesh October 8, 2008 at 8:43 am

    My questions would be:

    How often do I need to commute by bike to qualify?

    What will I need to do to prove I qualify.

    Where do I point my Employer to?

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  • Anonymous October 8, 2008 at 9:05 am

    So you can use the tax credit if you use Max or bus for part of your trip, just as long as you aren't getting any other discount on TriMet passes (like an employer-subsidized pass program)?

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  • Kt October 8, 2008 at 9:19 am

    The full FAQ on the LoAB website has a lot of good information that would answer quite a number of questions being posted here in the comments section.

    J.Maus, would it be possible to include the full answers to the questions instead of exerpts, or even to just post the whole FAQ here with permission from the LoAB?

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  • T27 October 8, 2008 at 9:38 am

    Very disappointing. I expected to receive a tax deduction for bike commuting; instead it is another burden on my employer. I work for a small company, and can see how the paperwork alone can cost more than the benefit. I ride nearly every day, most of the employees ride at least occasionally, we park our bikes in the office and have a shower, but I think it will be more trouble than it is worth. Oh well, I ride because I want to ride and a couple of dollars isn’t going to change that.

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  • JMM October 8, 2008 at 10:06 am

    T27, my thoughts exactly.

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  • Icarus Falling October 8, 2008 at 12:51 pm

    Once again.

    Crappitty Crap with Crap on top.

    Any act along these lines worth it's salt would be based on the actions of the individual, and the tax break would be handled through the individual tax return.

    Having it be an employer based and controlled tax break cuts out probably 9/10ths of those who would/could benefit from it.

    And T27 is right. It is true that the extra burden on employers will certainly cut back even more on those who are offered this tax break.

    This Bicycle Commuter Act should have been thrown in the round file 4 years ago, and revamped as a tax break for EVERY man and woman who commutes by bike, regardless of who you work for.

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  • Opus the Poet October 8, 2008 at 1:07 pm

    Not to try to hijack the thread, but did you see what the CEO of Lehman Brothers received in cash compensation while he was busy running the company into the ground? Half a billion dollars over 8 years. Do you know what the largest lottery jackpot ever in the world was? About $25 Million less than that, payable over a 26 year period. And under the terms of the bailout he still gets to keep that money, where we get $240 a year if our employer participates in the program, if we are employed (I'm not).

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  • joe October 8, 2008 at 1:08 pm

    $20 per month, especially when compared to the $215 for PARKING, seems like a small amount. while this will not discourage people from riding to work, it will not encourage people, either.

    anyone know why this was the number chosen by blumenauer, et al? (not trying to be negative but just wondering why not go for equal benefits for getting to work?)

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  • Rob October 8, 2008 at 3:52 pm

    I passed the information on the new commuter tax benefit over to our company's HR department.

    Disappointingly, their response was: "thanks, but we're not planning on providing this benefit to employees now, or at any point in the future."

    So if HR won't budge, does an individual have any options here?

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  • r October 8, 2008 at 4:10 pm

    not sure where the 20 a month comes from, but would note that it is to be used as reimbursement for actual out of pocket expense related to the bike (so it's actually "up to" 20 a month). this will not buy you a bike, but it probably will keep you in tubes and chain lube and buy you a couple of lights.

    re the comments about the paperwork being a headache for the employer: oddly enough, the Code section this was patched into already has a provision for "de minimis" fringes for which the paperwork would be too burdensome -- but transit allowances are excluded. so ironically, while your employer might have been able to give you a de minimis fringe for your bike commuting, now with this new law she cannot.

    also note section (f)(4), quoted in comment 5. if the employer sets the 240 aside in an account you can draw from, you will be taxed on the whole 240 whether you take it or not.

    eileen, comment 3, no, this is not available for the self-employed.

    and anonymous comment 7, correct, if you are getting an employer-subsidized transit pass you cannot also get the bike benefit, sorry.

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  • joe October 9, 2008 at 4:10 am

    r - I agree with your pointl you seem like you know a ton about taxes and such.

    while I may just be irritated at the idiocy of our legislative process, I cannot help but wonder why our government would encourage wasteful practices(like driving and parking in garages) more than cycling.

    this bill feels like opening a christmas gift and finding an old pair of shoes.

    I wonder how many portland businesses will go along with this program, anyway?

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  • ibf January 8, 2009 at 9:37 am

    hi. i am an employer with an employee requesting this. can someone please direct me where to go to figure out how to do this for them? thanks!

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  • HR Scoop March 11, 2009 at 1:22 pm

    Another HR person trying to do this for my bikers. Figuring this thing out, how to make it work, WOW! Does anybody have answers yet?

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