The federal tax incentive for bicycle commuting has officially reached its end — and the change carries important implications for both business owners and tax clients.

Under the One Big Beautiful Bill Act (OBBBA), the qualified bicycle commuting reimbursement has been permanently removed from the tax code beginning in 2026. What was once a small but meaningful tax-free benefit is now fully taxable — and no longer deductible for employers.

Here’s what that means for you.

A Quick Recap: What Was the Bicycle Commuting Benefit?

Originally introduced to encourage eco-friendly commuting, the benefit allowed employers (from 2009 through 2017) to reimburse employees up to:

• $20 per month

• $240 per year maximum

The reimbursement covered reasonable expenses such as:

• Bicycle purchase

• Repairs and improvements

• Storage costs

The advantages were clear:

• Tax-free for employees

• Deductible for employers

• Not required to be reported on Form W-2

However, the Tax Cuts and Jobs Act (TCJA) suspended this benefit from 2018 through 2025. During that suspension period, reimbursements became taxable to employees, although employers could still deduct the expense.

What Changes Starting in 2026?

With the OBBBA now in effect, the suspension has turned into a permanent elimination.

Beginning in 2026:

• 🚫 Bicycle reimbursements are taxable wages to employees.

• 🚫 Employers cannot deduct the reimbursement as a business expense.

• 🚫 The prior tax advantage no longer exists.

This creates a double financial impact — taxable income for employees and no deduction for employers.

Impact on Business Owners

If your company currently offers bicycle reimbursements:

• Review and update payroll classifications.

• Ensure reimbursements are properly included in taxable wages.

• Reevaluate whether continuing the benefit aligns with your compensation strategy.

Ignoring these changes could lead to payroll compliance issues and unnecessary tax exposure.

Impact on Tax Clients

If you receive bicycle commuting reimbursements:

• Expect them to increase your taxable income.

• Consider adjusting withholding if necessary.

• Understand that this reimbursement no longer reduces your tax burden.

While the dollar amount may be modest, compliance and proper planning remain essential.

Other Commuter Benefits Still Exist

It’s important to note that other transportation fringe benefits — such as transit passes and qualified parking — remain available under current tax law. However, their deductibility rules differ from the former bicycle benefit.

Final Takeaway

The bicycle commuting reimbursement once provided a modest but valuable tax incentive. As of 2026, that benefit is permanently gone.

For business owners and tax clients alike, this change highlights the importance of staying current with evolving tax legislation and adjusting strategies accordingly.

Now is the time to review your policies, payroll procedures, and tax planning approach to ensure full compliance in 2026 and beyond.