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The Bicycle Commuter Act was passed in tandem with the recent financial rescue package. It becomes effective January 1, 2009.
The original intent was that an employer could now provide up to $20 a month in incentives related to an employee's bike commuting, to include, but not limited to, bike parking facilities, shower facilities, and maintenance then deduct that amount from their taxable income.
Employees and employers save all income and payroll taxes on the amount of money provided for qualified transportation fringe benefits for commuting. In the case of the bike provision up to $20 per month ($240 per year) can be provided tax-free for bike commuting. Due to the tax savings, employees can save in annual commuting costs, while employers save on Federal and State income taxes; Social Security (FICA) taxes paid by both employers and employees, and unemployment, disability, workman's compensation and retirement costs driven by salary.
Most of the costs associated with commuting by bike are fixed and are barely affected by the daily distance covered. The intent of this provision is to help defray some to those fixed costs such as; the purchase of a decent commuter bicycle; bike lock; helmet; bike parking facilities; shower facilities; and general maintenance.
The real costs associated with bike commuting are much less than commuting by car, but those bike commuters should be able to have help with. It is also important to send signals that this not just acceptable, but a good idea. Giving people a little financial incentive is another step in the right direction.
For more information, the League of American Bicyclists has a helpful Q&A section: http://www.bikeleague.org/news/100708faq.php