As Spring begins to bloom around our country, we tend to get “outdoor” tax questions. Recently, we were asked about the “bicycle to work” fringe benefit.
Internal Revenue Code section 132(f)(1)(D) historically has contained a pretty nice opportunity for workers who choose to make their commute into a bike ride. Prior to the enactment of the 2017 Tax Cuts and Jobs Act (TCJA), “qualified bicycle commuting reimbursements” of up to $20 per qualifying bicycle commuting month were excludible from an employee’s gross income.
HOWEVER, the TCJA “suspended” this benefit through December 31, 2025. Here’s the precise wording from the TCJA…
SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING REIMBURSEMENT.
(a) IN GENERAL. – Section 132(f) is amended by adding at the end the following new paragraph:
‘‘(8) SUSPENSION OF QUALIFIED BICYCLE COMMUTING REIMBURSEMENT EXCLUSION. – Paragraph (1)(D) shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.’’.
So, for now, we have to wait until 2026 to have this benefit be non-taxable (pre-tax) once again.
A qualifying bicycle commuting month was any month during which the employee regularly used the bicycle for a substantial portion of travel to a place of employment and during which the employee does not receive transportation in a commuter highway vehicle, a transit pass, or qualified parking from an employer.
Reasonable expenses were those incurred in a calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if the bicycle was regularly used for travel between the employee’s residence and place of employment.
If your institution has continued to pay workers this benefit (or desires to begin paying it), note that the qualified bicycle commuting reimbursement would be taxable to the worker through 2025.
David C. Moja, CPAwww.mojacompany.com
The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.