Employer Programs

Employer-based programs can be among the most effective of transportation demand management programs, in part because the program can be tailored to the commute needs of employees at their specific place of work. Employers can provide opportunities for employees to escape a congested commute through options such as alternative work schedules or telecommuting. Employers are also in a position to influence employee commute choices with incentives (such as a subsidized bus pass) or even by removing/reducing subsidies that encourage drive-alone commutes. Research indicates that financial incentives and disincentives such as these are particularly effective commute trip reduction measures. Numerous studies conclude that parking charges, telecommuting, flexible work hour provisions including compressed work weeks, guaranteed ride home programs, and incentives for biking and walking all can be effective in reducing drive alone commuting. In addition, programs that encourage carpooling and vanpooling have proven successful in a number of localities, particularly if vans are provided.

Tax Incentives for Your Business
Employers providing employee commute programs are eligible for a variety of tax breaks. Under Internal Revenue Code (IRC) 132(f). Employers may provide workers with up to $230 per month in tax-free transit and vanpool benefits in 2010. The monthly limitation under Section 132(f)(2)(A) Qualified Transportation Fringe Benefits regarding the aggregate fringe benefit exclusion amount for vanpools (commuter highway vehicles) and transit passes is $230. The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $230. Commuters can receive both the transit and parking benefits (i.e., up to $460 per month). Employers can allow employees to use pretax dollars to pay for transit passes, vanpool fares and parking.

  Transit Vanpool Qualified Parking Qualified Bicycle Commuting Reimbursement
Incentive Levels Up to $230/month* for transit expenses Up to $230/month* for vanpool expenses Up to $230/month** for parking at or near an employer’s worksite, or at a facility from which employee commutes via transit, vanpool, or carpool Up to $20 per qualified bicycle commuting month. Bicycle commuting reimbursement includes any employer reimbursement during the 15-month period beginning with the first day of the calendar year for reasonable expenses incurred by the employee during the calendar year.
Employer Tax Benefit Employers give their employees up to $230/month* to commute via transit; gets a tax deduction and saves over providing same value in gross income

or

Employers allow employees to use pre-tax income to pay for transit and employers save on payroll tax (at least 7.65% savings)

or

A combination of both up to statutory limits

Employers give their employees up to $230/month* to commute via vanpool; gets a tax deduction and saves over providing same value in gross income

or

Employers allow employees to use pre-tax income to pay for vanpooling and employers save on payroll tax (at least 7.65% savings)

or

A combination of both up to statutory limits

Employers give their employees up to $230/month** for qualified parking; gets a tax deduction and saves over providing same value in gross income

or

Employers allow employees to use pre-tax income to pay for qualified parking and employers save on payroll tax (at least 7.65% savings)

or

A combination of both up to statutory limits

Employers reimburse their employees up to $20/month for qualified bicycle commuting; gets a tax deduction and saves over providing same value in gross income.

According to the IRS, “Generally, you can exclude qualified transportation fringe benefits from an employee’s wages even if you provide them in place of pay. However, qualified bicycle commuting reimbursements do not qualify for this exclusion.”

Employee Tax Benefit Employee receives up to $230/month* tax free (not on their W-2 form)

or

Employee pays for commute benefit with the pre-tax income and saves on income tax

or

A combination of both

Employee receives up to $230/month* tax free (not on their W-2 form)

or

Employee pays for commute benefit with the pre-tax income and saves on income tax

or

A combination of both

Employee receives up to $230/month** tax free (not on their W-2 form) for qualified parking

or

Employee pays for commute benefit with the pre-tax income and saves on income tax

or

A combination of both

 

Bicycle Commuter Benefit

Additionally, IRC 132(f) was amended in 2008 to include bicycle benefits. The benefit—up to $20 per month—began in 2009. Employers may reimburse employees, tax free, for “reasonable” expenses related to their bike commute, including equipment purchases, bike purchases, repairs, and storage if the bicycle is used as a “substantial part” of the commuter’s trip to work for the month. Any employee already receiving a transportation benefit, such as mass transit or parking, is not eligible for the Bicycle Commuter Benefit.

Below is the IRS language that describes this benefit.

(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).

· Bicycle Commuting Month. For any employee, a qualified bicycle commuting month is any month the employee regularly uses the bicycle for a substantial portion of the travel between the employee’s residence and place of employment and does not receive: Transportation in a commuter highway vehicle, any transit pass, or qualified parking benefits.

· Reasonable expenses include: The purchase of a bicycle and bicycle improvements, repair, and storage. These are considered reasonable expenses as long as the bicycle is regularly used for travel between the employee’s residence and place of employment.