Tax incentives for bike commuting

פורסם: 25 באוג׳ 2013, 11:47 על ידי: Sustainability Org   [ עודכן 12 במרץ 2014, 13:29 ]
Eran Shchori, bike to work project manager, public policy team, Israel Bicycle Association (Israel Bishvil Ofanaim)
Last update: 24 August 2013

Tax incentives encouraging employees to cycle to work (view source)
The use of bicycle mileage allowance encourages employees to cycle to work. The benefits of cycling to work include improved employee health, fewer sick days and increased productivity. It also insulates businesses from disruptions caused by congestion and public transport problems – and has been proven to reduce stress levels amongst employees.

Belgium, the Netherlands and Great Britain have introduceda tax-free mileage allowance for bike commuters. These schemes and regulations are a European wide inspiration and something for all countries to consider implementing in their respective legislation.

  • In Belgium companies and public organizations are entitled to pay their employees a tax-free allowance up to €0.21 / km cycled / day (a total of up to 15 km / day) on their salaries.
In Belgium, the incentive is limited to €3.15 / day (€ 0.21* 15 km / day). For a person who commutes 7.5 km one way, and who works 211 days a year, the incentive is limited to € 664.65 per year (€0.21 * 15 km * 211 days).

In 2010, the mileage allowances paid in Belgium for the use of bicycle when commuting accumulated a total of €43.4 million. A total of 206,702,516 kilometres were cycled to work under the scheme in 2010, and 270,728 beneficiaries participated.

On this basis, the average incentive was €160.3 a year per participating employee. On average, each beneficiary pedaled 763.3 kilometres per year. Using these calculations the average incentive was € 0.76 per day (€ 160.3 * 211 days).

The system operates in such a way that the employer receives a tax refund for the payment of this wage supplement. This is a very popular way to encourage employees to cycle, as shown in the table below.
  • The Netherlands has a similar incentive. Employers can pay a tax-free mileage allowance for bike commuters of up to € 0.15/km cycled/day.
  • Great Britain has a corresponding incentive. The employer may pay a tax-free mileage allowance for bike commuters of up to GBP 0.20/miles cycled/day.

Tax incentives for bike commuting (view source)
While there are no such tax incentives in Denmark, countries like the United States, the United Kingdom, Italy, Belgium and Holland have all introduced different variations of tax incentives for bike commuters. Especially the English Cycle to Work schemes and the Dutch regulations are inspirations to other countries. Even though the American regulations are not as favourable as the English and Dutch, the regulations serve as a way to give companies and employees incentives to a more eco-friendly transport behaviour. In the following you can read a short description of different countries’ bike tax incentives.

Bike incentives in Holland and Belgium

In 2001, a tax reform was implemented in Holland with, amongst others, the purpose of encouraging eco-friendly means of transport. This action meant that an employer is now able to make company bikes, rainwear and other cycle equipment available to employees without demanding any tax liability from them. Furthermore, an annual tax credit was introduced for the employees when using their own bike to work. In this way the employer can pay the employee 0.15 € per kilometre tax free.

In Belgium, companies and public organisations are likewise allowed to pay their employees when cycling to work with an amount of 0.20 € per kilometre per day (no more than 15 kilometres a day). The supplement is tax free for the employees and the employers get tax credit for the expense.

It works!

Research from Belgium has shown that in companies where the fare is being paid, cycling increases considerably (in the study in case, cycling increased from 6.3% to 9.5%). Furthermore, companies in Belgium are allowed to give their employees a tax-free bike. In contrast to Holland, there is no limit to the value of the company bike and the employer is allowed to compensate the cycling employee for the maintenance costs of the bike and even the bike parking.

Bicycle Commuter Tax Provision (USA)

The American Government passed in October 2008 a $700 billion rescue package including the Bicycle Commuter Tax Act. With this act, bike commuters may receive up to $20 per month ($240 a year) tax credit for every qualified month that they bike to work. The act was part of a package dealing with climate, energy savings and transport regulation.

To qualify for the tax credit an employee must regularly use a bike for a substantial portion of the travel to and from work and not receive any other qualified transportation benefit. The companies are obliged to use the deduction to compensate the employees expenses related to the bike.

The American scheme will probably not alter the transport habits in the US, but it is an expression of an effort, which hopefully will be extended the next years.

Cycle to Work schemes in the UK

The 1999 Finance Act introduced in the UK an annual tax exemption to promote healthier journeys to work and reduce environmental pollution. As part of the government’s Green Transport Plan, this allows employers – both private and public – to lend cycles and cyclists’ safety equipment to employees as a tax-free benefit.

A condition is that the schemes must apply for all employees, and that bikes and equipment are used mainly for work-related purposes – meaning that more than 50% of the use of the cycle and safety equipment must involve a journey to or from the workplace. If the employee does not meet the condition of work-related use, the employee is taxed of the cost-free use.

It is the company who owns the bikes and the equipment, and the company who can write off and deduct the expenses. At the end of the loan period, e.g. due to job change, the company can offer the bike and the equipment to the employee at market value.

Employers can pay up to 20 pence per mile tax free to employees who use their own cycles for work-related travels.

You can read more about the English Cycle to Work scheme here: Cycle to Work Scheme – Implementation Guidance and Particular benefits: bicycles: simplified approach to valuing cycles to employees after end of loan period
and updating of the terms.

The Bicycle Commuter Tax Provision - USA (view source)

The Bicycle Commuter Act of 2008, which became a law on January 1, 2009, is a transportation fringe benefit that provides a small sum to qualified employees to offset costs incurred through bicycle commuting. Passed as an addendum to the larger Renewable Energy Tax Credit legislation, the tax provision sought to elevate cyclists to the same level as people who received qualified transportation benefits for taking transit.

The provision functions as a benefit offered by employers to those employees that regularly use a bike for a "substantial" portion of travel between home and work. Meeting the "substantial" portion requirement usually means biking three days out of every five for full-time employees and less for part-time employees. The benefits include offsetting fixed costs associated with bicycling, including the cost of a commuter bike, bike lock, helmet, bike maintenance and the provision of bike parking and showers at work. Individuals that receive this benefit, up to $20 per month, cannot receive any other qualified fringe transportation benefits.

Bicycle Commuter Tax Reimbursement Cards
The Leauge developed reimbursement cards to make implementing the Bicycle Commuter Act in your workplace as easy as possible. Simply sign the pledge on the card that states you commuted to work by bike for at least three days per week, and then staple your receipts to the card
. Download reimbursement cards for your workplace.

How are companies implementing this benefit?

Companies are finding their own unique ways of implementing this program. At the League we developed a set of monthly reimbursement cards (January, February...) to help track employee commutes. Meredith Corporation developed a set of guidelines to help employees understand the reimbursement program, click here to view their guidelines. To help track employee miles Meredith uses a tracking log.