Many employees assume that if their employer reimburses them for bicycle commuting expenses, those payments are tax-free. While that was generally true for many years, the Tax Cuts and Jobs Act (TCJA) dramatically changed the rules.

If your employer pays for your bicycle commuting costs, the tax consequences today are often different than many taxpayers expect.

The Bicycle Commuting Benefit Before the TCJA

Congress originally created a qualified bicycle commuting reimbursement as a type of qualified transportation fringe benefit.

The Internal Revenue Code provided that certain reasonable expenses incurred for commuting by bicycle could be reimbursed by an employer without creating taxable income.

These expenses generally included:

• Bicycle purchases
• Bicycle improvements
• Repairs
• Storage
• Safety equipment

The reimbursement was subject to statutory limits and various qualification requirements.

What Changed?

The Tax Cuts and Jobs Act suspended the exclusion for most employees.

IRC § 132(f)(5)(F) provides:

“For taxable years beginning after December 31, 2017, and before January 1, 2026, the term ‘qualified transportation fringe’ shall not include any qualified bicycle commuting reimbursement.”

This means that, during the suspension period, bicycle commuting reimbursements generally do not qualify for tax-free treatment for employees.

Treasury Regulations Continue to Define Qualified Bicycle Commuting Reimbursements

Treasury Regulation § 1.132-9 (Q/A-19) explains that a qualified bicycle commuting reimbursement generally means reasonable expenses incurred by an employee for:

• purchasing a bicycle,
• bicycle improvements,
• repairs, and
• storage,

when those expenses are incurred for commuting between the employee’s residence and place of employment.

The regulation also explains that employees generally cannot receive both a bicycle reimbursement and certain other transportation fringe benefits for the same period.

Although these regulations remain useful for understanding what constitutes a bicycle commuting reimbursement, the TCJA suspended the tax exclusion itself for most employees through the applicable suspension period.

Are Bicycle Reimbursements Taxable Today?

For most employees, yes.

If an employer reimburses bicycle commuting expenses during the suspension period, the reimbursement generally becomes:

• taxable wages,
• subject to federal income tax withholding,
• subject to Social Security tax, and
• subject to Medicare tax.

The reimbursement is generally reported on the employee’s Form W-2.

Does This Mean Employers Cannot Reimburse Employees?

No.

Employers remain free to reimburse employees for bicycle commuting expenses.

The primary change is that the reimbursement is generally taxable compensation rather than a tax-free fringe benefit.

Are Employers Still Allowed to Deduct the Payments?

Generally yes.

Provided the payment otherwise qualifies as an ordinary and necessary business expense under IRC § 162, employers may generally deduct compensation paid to employees.

The TCJA primarily affected the employee’s exclusion from income—not the employer’s ability to deduct reasonable compensation.

Could the Rules Change Again?

Yes.

Congress periodically modifies transportation fringe benefits.

Taxpayers should monitor legislative developments because Congress may choose to extend, modify, or permanently revise the current rules.

Common Misunderstandings

Many taxpayers incorrectly believe:

• Bicycle reimbursements are always tax-free.
• Bicycle benefits work the same as parking benefits.
• The IRS eliminated bicycle reimbursements altogether.

None of these statements is entirely accurate.

Instead:

• employers may still offer reimbursements,
• employees may still receive them,
• but they are generally taxable during the TCJA suspension period.

Key Takeaways

If your employer pays for your bicycle commuting expenses, do not automatically assume the reimbursement is tax-free.

The Tax Cuts and Jobs Act suspended the exclusion for qualified bicycle commuting reimbursements for most employees during the applicable suspension period. As a result, these reimbursements generally constitute taxable wages even though employers may still provide them.

Because employee fringe benefit rules frequently change, reviewing the applicable Internal Revenue Code provisions and Treasury Regulations can help avoid unpleasant surprises at tax time.

Disclaimer: This article is intended for general educational purposes only and does not constitute legal or tax advice. Every taxpayer’s circumstances are different. If you have questions about bicycle commuting benefits or other employee fringe benefits, consult a qualified tax professional or attorney before relying on general information.

At Dino Tax Co, we help clients navigate tax matters ranging from unfiled returns to IRS letters and levies and everything in between with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call or text (713) 397-4678 or email davie@dinotaxco.com. We’re here to help you take the next step.