Commuter Tax Benefit For Bicycle Commuters

On October 3, 2008, President Bush signed into law, as part of the Emergency Economic Stabilization Act of 2008, a qualified transportation fringe benefit for bicycle commuters.  This new law expands Code Section 132(f) by allowing employers to reimburse bicycle-commuting employees up to $20 per month for bicycle commuters.  This new fringe benefit is effective January 1, 2009.

This benefit can only be paid by the employer; employee salary reduction contributions will not allowed to pay for the benefit.  The employer may reimburse up to $20 per month for reasonable expenses incurred by an employee for the purchase of a bicycle and bicycle improvements, repair and storage, if the employee regularly bikes to work during that month. Employees can receive the bicycle reimbursement for the particular month that he/she accrued the qualified expenses.  Individuals who are already participating in a pre-tax benefit program for transit or vanpooling are not eligible to receive the fringe benefit for bicycle commuters.

An employer can offer this benefit in a number of ways including reimbursement of receipts, regular monthly payment or through a voucher system.  The Internal Revenue Service (”IRS”) should release guidelines shortly.