San Francisco Bike Blog

Remember that $20/month ‘bike commuter tax benefit’ you have been wondering about since it officially passed into law? Well, a local company called Bike Bux, LLC., is offering what appears to be a very straightforward mechanism for you to receive this benefit - a ‘Bike Bux’ MasterCard that acts like a debit or gift card, and works only at bike shops and sporting goods stores that stock bike gear.

Jon Kessler, a Bay Area biker who has a background in employee benefits and taxes, heard about the bike commuter tax benefit and started talking about it to people in his ‘HR and benefits’ world. The reaction from HR admins? Boo. The benefit, they said, would be complex, difficult to administer, etc. So Jon and his wife decided to eliminate those excuses by making the benefit as simple to administer as possible. Bike Bux, LLC. is their own, separate company - and self-funded.

It works like this: Your benefits/HR folks order some cards from Bike Bux, and then hand them out to employees, like you, who bike for a ’substantial’ portion of their commute. Then, when you need to pay for a bike, gear, maintenance, repair, or storage - use your Bike Bux MasterCard (assuming it has some value on it). In the most simple case scenario, that is it. Nothing more. It really is that simple.

The meaning of ’substantial’ is going to fall out over the next year, but if biking is part of your daily commute - at least one leg of your journey to work, then that qualifies as ’substantial’ to me.

Importantly, and you probably already know this, if you already receive some commuter tax incentives - like pre-tax tickets for the subway or whatever - then you can not also collect this $20 benefit. At least, I believe this to be the case.

Now, for the first twenty questions you have, I’d suggest heading on over to the Tax FAQ page - it’s good. You can probably just read down the entire page.

I emailed Jon to ask a few other questions that popped into my head, and I’ve tried to summarize some of those answers below, as best I understand them. Of course, none of this should be construed as tax advice.

Your company does not have to offer this service to you - it’s voluntary on their part. There are plenty of reasons they might want to do this, and some can be found here on the Tax FAQ page - briefly, “(1) Bike Bux are 100% deductible for employers and 100% tax-exempt for employees; (2) biking is exercise which can reduce employer healthcare costs; and (3) more bikes mean fewer traffic and parking problems.” Primary selling points to your overburdened benefits person might be that using Bike Bux is (a) simple, (b) inexpensive, and (c) awesome. It pays for some of your bike commuting expenses. Sounds good to me.

There are three denominations of Bike Bux cards - you can think of them as gift cards - $20, $60, and $240. That is one month, three months, and twelve months, respectively. If you only commute during the summer season, for instance - about three months - then you will only need and be allowed to use, by law, up to $60 over those three months, so you can get three individual $20 cards, or a single $60 card. That is up to you and your employer to work out.

There are no long-term agreements or commitments or anything like that. For each card your employer buys - whatever the monetary denomination - they will pay Bike Bux a $3 processing fee. Want to buy a single $20 card? Authorize a charge or send a check for $23. Want three $60 cards? Authorize a charge or send a check for $189 [ 3 * ($60+$3) ].

So, if your benefits folks know you are a year-round commuter, they’ll save a bit of cash if they just drop a single $240 card on you instead of buying 12 individual $20 cards for you. The $3 per-card fee for each card covers three primary categories of costs - the cost of the plastic card itself, the cost of shipping the cards to your company (free to your company, unless you want express delivery), and the various transaction charges and fees that Bike Bux has to pay to participating banks.

For those of us in an ideal-type situation where we get to commute by bike all the way to work year-round, and our employers are cool so they’ll rush out and buy lots of Bike Bux cards for all of their bike commuters, they can order them now, and then give each of us a $240 Bike Bux card on January 1, 2009 (or whenever we return to work). We can spend it all at once - say, while purchasing a new bike - or we can use it a bit at a time. There may be an expiration on the card of about fifteen months - think Jon is going to check on this.

Let’s take a somewhat extreme, but in a way, ideal, situation - an employee doesn’t ride a bike at all, but thinks they want to try it. With $240 to go towards the purchase of a new bike, why not, right? It’s up to each employer to decide who gets cards, and they don’t have to offer them to everyone. For instance, an employer might decide that seasonal workers might not get a card. For any and all persons to receive a card, an employer may require everyone to sign a simple letter stating that they do a ’substantial’ amount of their commute by bike, or in the case of someone about to buy a new bike, that they will. So, it is possible, and maybe likely, that your benefits folks could offer a $240 card to an about-to-be-brand-new-bike-commuter on January 1, 2009 (or their first day back at work). The company, I’m guessing, would want to have that employee sign a ‘letter of intent’ to start doing a ’substantial’ amount of their commute to work by bike.

The League of American Bicyclists states on their FAQ page that they are working with a leading benefits provider to try to make this bike commuter benefit happen by the new year. That provider is not Bike Bux.

The safe thing to do, it seems, would be to let your employer - probably your HR/benefits folks - know that you’re interested in this benefit. They may have no idea what it’s about, so the earlier they hear about it, the better. Bike Bux will soon have some kind of online holiday card thing that you and any biker folks can send to the appropriate person(s) to introduce them to the bike tax benefit.

I was curious if I’d be able to use my Bike Bux card at bike/coffee shops like Mellow Johnny’s and Mojo Bicycle Cafe, and yes, I could, but only to buy gear and services and all that - not my cafe mocha.

If someone decides to take up commuting by bike in July, then they should be eligible for up to $120 over the course of the rest of the year - $20 per month for six months.

You can order Bike Bux right now. If you’re lucky enough to have cool benefits folks, they can jump on over to BikeBux.com and order some cards by check or credit card. Jon said the first orders rolled in earlier this week.

I have to admit, when I first heard about this tax benefit, and even when it became law, I thought, ‘eh.’ But this development is changing my thinking. It’s making the benefit real. Pretty exciting stuff.

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