Bike Your Way to Some Tax Savings
Jun 04, 2015
Summer is here! Almost. With the nice warm weather, who wants to be cooped up in their car every day on their way to work? Many American’s across the country have taken up alternative travel arrangements to get themselves out of the isolation of their cars. Finding other ways to get around town is a great thing for their health and the environment, but what many employees are unaware of is it could be good for their pocketbooks as well!
Gas is expensive! So, put aside the obvious fact that biking to work would save some serious dough and consider the possible tax benefits to making the daily environmentally conscious commute to work. That’s right…tax benefits.
The Internal Revenue Service has decided that Qualified Bicycle Commuting Reimbursement in the amount of twenty dollars ($20) per Qualified Bicycle Month can be excluded from their employees’ wages. A Qualified Bicycle Month is any month:
- In which an employee uses their bicycle on a regular basis for a substantial portion of commuting to their residence and place of employment and,
- The employee does not receive any transportation in a commuter highway vehicle. The employee doesn’t receive a transit pass or any qualified parking benefits.
Of course, the employer can provide a benefit over the twenty dollar threshold, but any amount over the exclusion limit would be required to be added to the employees’ wages. One of the nice benefits of this twenty dollar exclusion is the fact that even though the employees are not taxed on this exclusion amount; the employer can still deduct it as an expense against their own taxes.
So while twenty dollars per month isn’t a huge amount, wouldn’t it be nice to receive that benefit if you planned on the alternative traveling this summer! Save some money, good for the environment, and good exercise, seems like a win-win.
By: Jill Blakeman, CPA