Tax benefits
 

According to:
http://www.nctr.usf.edu/programs/cle...mmutebenefits/

bike commuters can get up to $20 per month. Seems a bit unfair, considering that other modes of transport receive up to $240 a month, and they are far more polluting. What is the rationale behind this? Maybe I'm missing something simple. $20 doesn't even buy me a decent helmet, pump or lock - forget other costs.

Typical example of vote buying. Far more people use those other, more polluting means of transport so that is where the money goes.
I have also heard from other who have gone after the deduction that the paperwork is waaaay more hassle than it's worth.

This is relevant for bicycle commuters in USA only, I'm assuming (of which I am one).

Does this mean that an employer may opt to provide up to $20 per "qualified" month to an employee who bicycle commutes, and the $20 is tax-free?

Or does this mean there is a deduction available on an individual's tax form for bicycle commute months (does not involve employer's incentive program).

I think it is the former, not the latter. But I'm not an accountant.

Any help on this issue would help me and other bicycle commuters in USA. Thanks!

Sounds like we can get up to $20 reimbursed (which implies provide bills - not really a problem) per month. But - $20? Really?

The way I read the link, it's basically a tax-free reimbursement for the money you spend in the mode the employee has chosen to use as alternate transportation.

With bike commuting, the reimbursement is not clearly defined, though. It just states "reasonable expenses". I imagine if I was part of the program and needed to replace a blown tube, I would be reimbursed for the $6 or so I spent on it. Tax free, of course.

I am curious about the details as well. Any accountants around that can help explain the IRS gibberish?

I think the argument would be that other modes of transport are more expensive.

Even though it's only $20 a month I wouldn't find it that hard to get a pretty good benefit out of this. A lot of my cycling costs are for items that aren't that expensive: chains, tires, blinkies, tubes, bearings, lube, pads, patch kits. As long as I spaced the purchases out, $20 would allow me to get that stuff for free or at a pretty good discount.

The problem is though that since it's a reimbursement for actual expenses there's paperwork involved. The company ends up spending more on admin costs than the benefit is worth to the employee. It would be better to have an annual benefit of $240. Then my organization could say, OK, we'll support this benefit but we'll process these expense requests no more than once a quarter, twice a year or whatever to keep the admin cost down.

This has been discussed before. IIRC, the employer has the option of whether or not to provide the benefit.

You can hold out and cash them in all at once. The purchase just has to be made within 30 days of the last month you are getting money for. I just got an expense check from my work for $120 for 6 months(Jan-June, bought the parts in beginning of July) of commuting on a $200+ bill of parts. At the end of the year I'll be able to get another $120 or however I decide to split it up in between.

So the employer has to do all this and it comes out of their pocket? I can ask mine but I bet I know what they'd say.

Under normal circumstances, amounts paid by an employer to an employee result in taxable income to the employee.

Let's say your tax rate is 25%.

In order to put $240 in your pocket, it costs your employer $320 ($240 / (1 - 25%)). Of that $320, $80 goes to the IRS, $240 goes to you.

This provision allows your employer to provide you with a $240 benefit. Since it is non-taxable, it only costs them $240.

This is similar to the tax provisions for employer sponsored health insurance.

Congress is trying use the tax code to incentivize employers to provide benefits that they deem "good" for society.

Yes.

I brought this up to my boss (who is a recreational cyclist) and she looked at me like I was a toking on a crackpipe. :D

I've been bringing this up with finance offices for my employer (USAF) for over 2 years now. They give me the blank look and tell me that they'll get back to me with an answer. They never do, and I keep asking, and eventually I get worn down and just let it drop for a time, until I get motivated to try again.

Oh yeah, because employers are alwys looking for ways to pay their employees more instead of getting them to work more for less, yeah.
Last time I had an offer of employment they never once gave me a number they would pay me and then tell me they were actually paying 25% more so I wont have to pay that amount in taxes.
Employers don't give a **** about how much tax employees have to pay, they only care about how much they have to pay out, and how to keep that to the absolute minimum.

I really don't blame my employer for not wanting to do $100 worth of paperwork to get me a handful of chump change.

The way I interpret this bill, you should be able to claim any reasonable bike commuting expenses when you file taxes, similar to medical expenses, so you don't have to go through your employer for this.

But them again maybe I'm completely wrong.

I guess you had a bad experience with a boss? You sound a bit bitter - - I know there are many employers that are exactly as you describe, but there are just as many that view their employees as investments and as human beings. I have a crew of 12 people, and although I have a bottom line to watch out for in my business I still give them as much as I can. What this does is to make them happy and enjoy their job and look forward to coming to work. I treat them with respect. What I get out of it is a wonderful crew that never calls in sick, never quits, always willing to do a little extra. If the benefit in the op was available at my location and an employee asked for it, I would probably say yes. Most of my peers would also. I agree that a lot of employers would not, but, frankly, that would be their loss.

I am not sure if this is correct. The OP's original link refers to "Qualified transportation fringe benefits." Fringe benefits are benefits you receive from your employer. The rules listed relate to the tax treatment of reimbursement payments that you receive from your employer. I don't think that is the same as claiming expenses as a deduction when you file your taxes.

That's the problem really. I don't mind an extra $240 but its too small to expect the company to process it.

Let me try a again.

Scenario #1
Let's say you agree to do a job for $320, and your tax rate is 25%. Your employer will pay you $320. You will have to give $80 to the IRS and your take home pay will be $240.

Scenario #2
Now, what if there was an identical job that paid only $240 but your tax rate was 0%? Your employer will pay you $240. You will have to give $0 to the IRS and your take home pay will be $240.

Theoretically you should be indifferent between the two jobs because your after tax take home pay is the same in both scenarios. However, it is obvious that first job scenario is more expensive for the employer ($320 out their pocket vs $240).

So, anytime an employer can compensate their employees with tax free benefits vs taxable benefits, it saves them money.

Do employer's actually "care" about the tax situation of their employees? Certainly not in an altruistic sense (I am assuming both employers and employees will act in their own best interest). But, it does have an indirect effect on the labor market. Ultimately I will accept a job if I think that the take home (after-tax) pay makes it worth while. Let's say I can live comfortably off of $20 per hour as my take home (after tax) pay. If my take rate is 0%, I will take a job for $20 per hour from an employer. What if my tax rate is 80%? I won't take the job unless they pay me $100 per hour. So, in this sense my employer will "care" about my tax situation because it impacts who they can hire and at what cost. I realize this is an extreme example but it illustrates the impact of the taxable vs tax-free designation of various employee benefits.

I think you're right. It's weird to me, though that the tax break is to be administered through the employer.

Like others have mentioned, I seriously doubt my employer wants to go through the hassle of reimbursing me for a $6 tube purchase every few months.

I do have a great health reimbursement account, though.

Yeah, they put the burden on the employer to make it easier for the IRS. If it comes out the employer's pocket the then the employer has an incentive to make sure the commuting expenses are legitimate. That prevents the IRS from having to audit a bunch of small deductions on their end. Also, in order to take advantage of most deductions, taxpayers will have to itemize. Since the large majority of taxpayers just take the standard deduction instead of itemizing, classifying it as a deduction would actually prevent the average taxpayer from taking advantage of the provision.

Here's the problem, in my opinion, with these sorts of measures. All of the congressional representatives that voted for this provision can stand up and say "Hey...look at me. I voted in support of cycling, the environment, etc."

Now, will it actually work?
Is it cost effective for employers to administer?
Is the amount large enough to make a difference for employees?
Can the average employee/employer understand the details of the provision or will they have to hire a CPA to figure it out?
Doesn't it just add an additional wrinkle to an already complex tax code?

These are all questions that our politicians can easily ignore and leave for someone else to figure out. In the meantime, they can be "on record" as supporting cycling, the environment, etc and use that as a selling point in their next election.

True, except 99% of employers contract this out to benefit firms that COULD do it if their customers demanded it. My employer, alas is anything but interested in demanding it from Hewitt.com, the firm that handles our benefits.

I'm not sure I would want to go through the hassle myself - but my workplace is large enough that we have an HR staff; if they put this in place, HR would deal with it along with all of the other little things they have to deal with.

Although this would really make more sense if there were some sort of ongoing expense that you needed to pay for, like, say, secure bike parking. Or, actually, if you joined a gym near work to use their showers after bike commuting, that might count.

My work provides bike lockers, so I'm not really going to complain.