The new Tax Cuts and Jobs Act, soon to be signed by President Trump, will reduce federal taxes for most bike businesses. But the new legislation also eliminates the Bicycle Commuter Benefit tax credit—a pro-bike tax rule that has been in place for nine years.
Both C corporations and S corporations should benefit from 30-percent-plus reductions in federal income taxes. Bike businesses of all sizes are likely to gain. PeopleForBikes and our industry partners pushed for these tax cuts, and we emphasized the need for tax relief for S corps. (A detailed description of how each of these tax rates will be calculated going forward can be found here.)
The Bicycle Commuter benefit was one of many employer fringe benefits that was eliminated by the Tax Cuts and Job Act. Employers can no longer reduce their federal tax bill by paying (and then claiming a business expense on) a $20-per-month reimbursement to employees for the costs associated with bicycle commuting.
PeopleForBikes supporters sent 3,500 letters to members of Congress in all 50 states asking that this benefit be maintained and included in the bill.
“The large reduction in federal taxes should be good news for our industry,” said PeopleForBikes president Tim Blumenthal. “All types of bike businesses operate on tight margins and these rate cuts will help them thrive.
“On the other hand,” Blumenthal continued, “The elimination of the Commuter benefit is bad news for bicycling. For nearly a decade, this tax-free reimbursement has been a practical, low-cost and symbolic way for the federal government to encourage bike commuting. We plan to work hard in 2018 to re-establish this beneficial tax credit.”