Published on March 23rd, 2013 | by James Ayre


U.S. Tax Code Rewards Automobile Use, Not Mass Transit Or Bicycling

March 23rd, 2013 by  

The U.S. tax code actively rewards automobile use by providing substantial benefits, but at the same time provides very limited benefits to those that bicycle or use mass transit. With the significant traffic and air pollution problems that many cities now have, it seems like a change in policy should be in order. A change that will actively encourage the use of bicycles and mass transportation systems rather than “subsidizing” the already ubiquitous automobile.

Image Credit: City Transportation via Shutterstock

Image Credit: City Transportation via Shutterstock

Recently, the Tri-State Transportation Campaign decided to take a look at the exact ways that tax code benefits apply to various forms of transportation. Renata Silberblatt is quoted as saying: “We did find that the federal tax code provides benefits to vehicle owners but offers limited incentives for taxpayers to take transit or bike.”

The key tax benefits are listed below:

Owning or operating a vehicle:
– Individuals who donate vehicles to charity can receive a tax deduction.
– Individuals who are involved in an automobile crash that is not fully reimbursed by the other driver’s insurance and is not the individual’s fault may be able to deduct the unreimbursed amount.
– Although recently expired, individuals could previously receive tax credits for the purchase or lease of certain fuel efficient vehicles and light trucks such as fuel cell vehicles, alternative fuel vehicles and hybrid vehicles. In addition, individuals can take a tax credit for qualified fuel cell vehicles serviced in 2012.
-Individuals who drive to work are eligible to take up to $245/month in a pre-tax deduction to cover their parking expenses.

Commuting to work by transit/vanpool:
– As part of the deal to avert the fiscal cliff that passed in January, transit and vanpool riders can take up to $245/month in a pre-tax deduction to cover their commute expenses. The commuter tax benefit is a retroactive fix for 2012 (when the transit tax benefit was lessened from $230 to $125) and it is not permanent, being offered only until the end of 2013. If not made permanent, the transit tax benefit will revert to a lower level comparable to previous years. Employers of those who use transit/vanpool also benefit from this deduction.
– Transit/vanpool riders can also take up to $245/month in a pre-tax deduction to pay for their parking expenses.

Commuting to work by bicycle:
– An employee can be “reimbursed up to $20/month for reasonable expenses related to commuting by bicycle.” Employers of bicycling employees can also benefit from this pre-tax deduction. This reimbursement cannot be combined with any other benefit, however. For example, if one bikes and takes transit to work, one must choose one benefit over the other.

These benefits are clearly slanted towards encouraging car use. Given the considerable public and personal health benefits of bicycling, reducing traffic/taking cars off the road, reducing air pollution, and reducing car accidents, it seems that something needs to be done to make mass transit and bicycle use on level ground with cars benefits-wise.

Check out our new 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

Tags: , , , , , , ,

About the Author

's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.

  • John Dough

    Wait. You already get bragging rights for saving the environment; you don’t have to pay for gas or parking or insurance; you’re more popular with the chicks; and you’re healthier than the rest of us, and you want the government to reimburse you for money you don’t spend?

    • The point is: why are drivers getting reimbursed?

      • John Dough

        Very good point, Zachary. Indeed! Why ARE drivers getting reimbursed? Why is anybody getting reimbursed?

        Nathan (the author) isn’t clear on what his solution would be to the discrepancy but (and I don’t mean to put words in his mouth) I think he might look the other way if he felt bicyclists enjoyed a subsidy on par with that offered to drivers and transit riders. In other words, all would be right if bicyclists were subsidized on the same level (hard as that would be to come to agreement on) as them.

        I would argue that nobody’s commute should be subsidized. Where on earth did the idea come from that people need to be compensated BY THE GOVERNMENT to get to work?!

        Where a level playing field exists, commuters would choose their own way of getting to work based on real costs, real travel times and real personal preferences.

        If driving, transit and bicycling (however small) subsidies ended, there would surely be a shift in commuting. But, how? It’s not so clear which way the mode shift would go…but it would be an interesting thing to observe! As individuals make their choices, equilibrium would follow.

        Long before people were paid to commute to work, I was a regular bicycle commuter. Gas was about $0.50 per gallon, my car got about 12 mpg, parking was free, bus fares were $0.25 each way. Needless to say, I didn’t ride my bike to save money. I would have been incredulous if anybody had offered to pay me to ride my bike and it never would have occurred to me to ask. I loved riding my bike to work!

        So, how would you correct the imbalance, Zachary? Would you bring about fairness by subsidizing everybody “equally” or by subsidizing nobody?

        • i don’t think he cares if subsidies are cut across the board or alternative modes are “brought up” to the same level. however, clearly, it’s pretty hard to “make things equal,” so i think he’d prefer they just be cut across the board. but idk. (btw, i do know that he isn’t a biker.)

  • sault

    Plus you have the $40B yearly shortfall in the Highway Fund that has to be made up from general federal revenues because fuel taxes are too low. This is the amount necessary just to hold our crumbling infrastructure together in its pitiful state instead of getting it into something resembling what a developed country in the 21st Century requires!

    Also, the fact that vehicle pollution causes billions in property damage, health problems, reduced worker productivity and premature death means that cars enjoy another massive subsidy from not having to deal with the consequences of their pollution.

    A great deal of our military expenditures in the Middle East are to keep oil exports running smoothly as well.

    Finally, the costs of dealing with climate change are sure to swamp all of the other costs I just mentioned. Offloading this burden to future generations instead of dealing with our mess NOW is a HUGE subsidy to anything that releases carbon, especially gas and diesel-burning vehicles.

    A lot of our problems as a society have come about because we didn’t draw the “system boundaries” correctly when planning things out or our assumptions about what DID get included in those system boundaries were wrong. We didn’t know better back when a lot of these boundaries were first developed, but now that the cracks forming in these systems are apparent to anybody who bothers to look (or ignores the HUGE financial incentive NOT to look…), it’s time to rethink things.

  • Tom G.

    Hi Nathan:

    I guess on this one I am gong to have to agree with Bill. While I certainly appreciate people who ride bicycles, it is the gas taxes and license fees that pay for most of the roads we all share. To me that negates most of your arguments which I also think are in some cases a bit of a stretch .

    While riding a bike can certainly be fun and in some cases is a very practical solution such as in heavy traffic, it is not the solution for most Americans. Hybrid and Electric Vehicles, mass transit and ride sharing are a few things that come to mind. I drove an 11 passenger van pool for many years and for the most part it was enjoyable and cost effective.

    So don’t give up on converting some of the hard core carbon burners to bikes. Maybe adding a 500 Watt wheel motor would help some of us older folks, LOL . Well written and interesting posting. Have a great day.

  • Bill

    Although interesting and relevant, to say these couple of tax code items encourages car use is an extreme stretch. Yes, there should be more tax code items for energy efficient transportation, but seriously. You did not mention the huge tax incentives for the actual purchase of electric cars like the Tesla. I think your material is slanted. On balance, the gas car incentives don’t overweigh.

Back to Top ↑