Don't Mess With Taxes

Bicyclists' fringe commuting benefits were eliminated under the new tax law. Other commuters also could find their workplace transportation perks slashed, too.

Woman on bicycle by Sunny via Flickr CC

It's forecast to be, for the third straight day, near 97 degrees this afternoon in the greater Austin area.

It's also National Bike to Work Day.

That is, shall we say, a pungent combination. Yet another reason I'm glad I work from home!

Biking benefits are ending: Despite the hot Texas summers (and springs and falls), the Austin area is bicycle-crazed. Folks two-wheel it all over the place, undeterred by the hills and heat.

But starting this year, workers who bicycle to work are facing another obstacle.

The Tax Cuts and Jobs Act (TCJA) that took full effect earlier in 2018 eliminated the employer-provided tax-free benefit covering some bike commuting costs.

Granted, it wasn't much, just $20 a month for a potential annual tax-free benefit of $240. Still, it was an acknowledgement that bicycle enthusiasts had long fought for (they won, temporarily it now seems, in 2009) so they would be considered more-or-less equals when it comes to commuting costs.

That's gone.

And actually, the overall commuting benefits situation workers and companies has changed under TCJA provisions for tax years 2018 through 2025.

In addition to doing away with the bicycle benefits, the new tax law also dramatically alters other qualified transportation fringe benefits (QTFBs).

Previous commuter benefits for all: Under prior law, employers could offer employees tax-free commuting benefits of up to $260 per month to cover mass transit passes, parking fees and vanpooling expenses, as well as the $20 monthly maximum for dedicated bicycle commuters.

These benefits were provided to workers via direct payments, reimbursements or salary reduction arrangements to help offset their costs of getting from home to the workplace.

Commuters, however, weren't the only beneficiaries.

In addition to making the commute less expensive for workers, companies received a tax benefit for providing the QTFBs. Businesses could count the worker commuting costs as a business tax deduction.

The TCJA ends that company tax break effective this year and for the next seven tax years.

Most QTFBs allowed, but without tax break: Technically, the new tax law says that employers may still deduct non-bicycle commuting expenses incurred that are necessary to ensure the safety of employees.

This includes such things as paying for workers' late-night job-related transportation and business travel expenses.

However, when it comes to other, day-to-day commuting, businesses no longer get a tax break for helping their workers pay for their commutes.

This has many employees worried that without the corporate tax carrot, employers might choose to do away with all QTFBs altogether.

Keeping benefits at a cost: Companies could opt to increase workers' pay so they can cover the commuting costs themselves. But that will mean the employees will be making more money on which they'll owe taxes.

There's also the possibility that companies where QTFBs are well-established will simply continue to subsidize their employees' — even bicyclers' — commuting expenses, without the federal business tax deduction.

In these cases, the transportation perks could be seen as a worthwhile business expense that allows companies a competitive advantage in this tight labor market. I've worked in an urban area before. I definitely would give the edge to a job offer that included help paying commuting costs.

This year, many employment advisors expect companies to continue providing most transportation benefits as usual as the businesses work through the new tax law's implications and await further guidance from the Internal Revenue Service.

But stay alert and in touch with your employer about the transportation benefits situation. The road to commuting tax breaks could eventually hit a dead end.

With or without tax benefits, I hope your biking to work and elsewhere this National Bike Month and the other 11 is as much fun as PeeWee Herman's ride (thanks Giphy.com!). You can see more entertaining bicycling GIFs and phots at Twitter's #BikeToWorkDay hashtag.

A version of this post with pre-TCJA rules ran last Bike to Work Day, May 19, 2017

You also might find these items of interest:

• Electric vehicle tax credits favor the wealthy
• 17 states now impose some fees on electric autos
• Washington State lawmaker says bicycles are bad for the environment