The IRS allows several tax deductions for business- and work-related travel and transportation expenses. Bicycling to work is not one of them, and employees cannot use any expenses associated with this form of transportation to reduce their taxable income. However, employers can claim a related tax deduction if they provide benefits under the Bicycle Commuter Act, which reduces the expenses of employees who bicycle to work.
Commuter Benefits and Taxes
Under the Bicycle Commuter Act, participating employers can offer up to $20 each month to employees who qualify for the transportation reimbursement benefit. This money contributes to reasonable expenses associated with riding a bike to work, such as the cost of purchase, repairs and storage. Employers offer it as a paid benefit, which is tax-free for employees. Including this fringe benefit in the employee's gross income would increase taxes for the employee and the tax the employer must contribute to Social Security and Medicare, so the IRS allows employers to claim the benefit as a deduction from taxable earnings in the associated tax year, and the amount is not included in an employee's W-2.