Don’t yet have a New Year’s resolution? If you’re an employer, consider adding pre-tax benefits in 2012 to encourage employees to use transportation options for commuting to and from work. Tax-deductible incentives, up to certain limits, let you exclude the value of non-taxable transportation benefits that you provide to an employee through their wages.
Rewarding employees who use alternatives to driving alone to work will not only provide them with financial benefits and improved quality of life; it is a win-win proposition. It helps employers to maximize the impact of their company’s investment in benefits, provides tax breaks, expands your labor pool, enhances your company’s image and reduces demands on parking.
During 2012, businesses can generally exclude the value of transportation benefits that they provide to an employee from the employee’s wages up to the following limits:
• $20 per qualified bicycle commuting month
• $125 per month for transit passes or vanpooling
“In 2012, employers can encourage bicycle commuting and use this as an employee benefit. Basically, any worker that substantially commutes by bicycle to work can receive a $20 per month stipend tax free from their employer,” said Lance Brant, a certified public accountant with Capstone Certified Public Accountants, LLC in Bend and Sisters. “In addition,” said Brant, “this practice encourages healthy habits and is good for the environment.”
The exclusion for qualified bicycle commuting reimbursement applies to reasonable expenses incurred by the employee during that calendar year only. Reasonable expenses include the purchase of a bicycle and bicycle improvements, repair and storage, as long as the bicycle is regularly used for travel between the employee’s residence and place of employment. Employers will in turn be able to deduct the expense from their federal taxes.
“For employers, there are a lot of inexpensive ways to encourage employees to use transit, vanpools or active commuting, and using these benefits is just another way to further efforts in that direction,” said Jeff Monson, executive director of Commute Options in Bend.
The same rule applies to encouraging use of public transit. “If a substantial portion of an employee’s commuting is done by mass transit, then the employee can be reimbursed for up to $125 per month as tax free benefit,” said Brant.
Currently, the benefits for commuting by public transit and vanpooling are the same. A federal tax benefit, called Commuter Choice, enables an individual to defray up to $125 per month through a pre-tax payroll deduction on specific commuting costs, including passes on transit systems and vanpool programs.
Vanpooling – typically defined as group of seven to 15 individuals commuting to and from work together in a “commuter highway vehicle” – helps target the segment of a work force living more than 15 miles away and those unable to conveniently use fixed-route transit.
Where vanpools are up and running – or can be added to save multiple drive-alone commuters traveling to one place of employment – employers can use similar incentives. “Employees can use a Commuter Choice benefit on a vanpool just as they would with fixed-route transit,” said Audrey Shuffield, with VPSI in Portland. VPSI is the world’s largest vanpool provider, and services employers in Central Oregon.
Providing benefits to employees who use alternate modes for commuting can really decrease drive alone commuting, thus improving local traffic congestion and air quality. “More people might give these other options a try if they know their business supports it, even at a basic level,” said Monson.
For more information on how to use pre-tax incentives for employees who use bike commuting, transit or vanpooling, ask your tax accountant for eligibility guidelines from the Bicycle Commuter Act (bike commuting) or Commuter Choice Act (transit and vanpooling).
Commute Options promotes choices that reduce the impacts of driving alone. For more information about Commute Options, contact Jeff Monson, Executive Director of Commute Options at 541/330-2647 or visit www.commuteoptions.org.
Annissa Anderson is a freelance writer and PR consultant in Bend.
