It’s my annual “Taxes from A to Z” series! Next up:
This should be a short post: you cannot deduct the costs of getting to and from work, no matter if you take a bus, trolley, subway, taxi, or drive your own car. Commuting expenses to and from your regular place of work (as opposed to travel for work) are never deductible.
As I’ve said before, you can’t make your commute deductible simply by adding a twist. Having your colleagues in the car or putting everyone on speakerphone doesn’t make it an office meeting even if you discuss business over steaming hot Starbucks flat whites the whole time. And tapping away on your laptop or listening in on a conference call while someone else drives or on the train may mean that you get work done but it doesn’t change the fact that you’re still commuting. And slapping a bumper sticker or other promotional material on your car doesn’t make it a business vehicle if you’re simply using it for commuting.
(See more on carpooling here.)
That said, while commuting might not be deductible, you may still enjoy a tax benefit to offset your commuting expenses. Tax benefits for commuters are available for employees with employers which offer the program as a benefit. Under current law, employers can provide either a de minimis transportation benefit or a qualified transportation benefit to employees with no tax consequences. The idea is that if your employer provides a transportation benefit that has so little value that accounting for it would be administratively impractical, the IRS allows you to exclude it from your income. So if your employer offers a program that reimburses you for your out of pocket costs, that reimbursement is not considered income for reporting purposes on your federal income tax return (you won’t even see it on your form W-2). If your employer offers you a larger reimbursement than what the Tax Code allows as a tax-free reimbursement – that’s awesome – but it’s still a perk but it’s reportable as income to you.
Under section 132(f) of the Tax Code, a qualified bicycle commuting reimbursement is a qualified transportation fringe benefit and is excludable from gross income. The annual amount that can be excluded is limited by statute and is not indexed for inflation. For 2014, the maximum exclusion is $20 times the number of months the bicycle is used for commuting to work; the amounts are the same for 2015. Allowable expenses include the purchase, maintenance, repair and storage expenses related to bicycle commuting.
Under section 132(f) of the Tax Code, you may also exclude up to $130 per month for reimbursements for a transit pass or commuter highway vehicle for 2014 and 2015. A transit pass is any pass, token, fare card or voucher which entitles you to ride free of charge or at a reduced rate on mass transit. Mass transit includes a publicly or privately operated bus, rail, or ferry. A commuter highway vehicle seats at least 6 adults (not including the driver) and logs at least 80% of vehicle mileage on transporting employees between their homes and work.
You get an even bigger boost for qualified parking benefits: up to $250 per month can be excluded for 2014 and 2015. Qualified parking benefits includes paid parking on or near a business premises; it would also include parking in lots close near mass transit or other locations where employees park to take advantage of commuter highway vehicles or carpools. It does not include parking at or near an employee’s home.
To claim these benefits, your employer must offer these benefits as part of a specific plan. It’s worth noting that, other than these specific tax breaks outlined at section 132(f), commuting expenses are otherwise not tax advantageous.
