Many Americans may face higher commuting costs after the New Year if the government chooses not to extend its transit and parking benefits that were increased as part of the American Recovery and Reinvestment Act.  Benefits would return to previous levels of $120 per month from $230 a month unless Congress agrees to extend the benefits.  The Senate voted to continue benefits in a vote yesterday; the House vote will follow.  Parking benefits will remain the same regardless of changes in legislation.

In the meantime, some private companies are offering other incentives to encourage biking and the use of public transportation. The furniture company IKEA, for example, recently gave all of its 12,400 workers a new all-terrain two-wheeler bike as a holiday gift.

President of IKEA US Mike Ward said, “We hope this bike will be taken in the spirit of the season while supporting a healthy lifestyle and everyday sustainable transport.” Ikea plans to open more stores in the U.S. and has recently opened its first store in Latin America. The company’s commitment to sustainable transport holds significant weight. IKEA provides other incentives for biking, like a dollar in cash for each day of bike commuting and on-site locker rooms and showers for employees.

Commuting benefits from the government are at risk of being cut back, meaning that many people may choose to get back in their cars. “Without this tax extension, employers will have no financial incentive to provide transit commuter benefits equal to the parking benefit,” says William Millar, president of the American Public Transportation Association. “This results in bad public policy that favors automobile use over public transit use.”

Employees who work for participating companies and organizations in the United States are currently eligible to receive up to $230 per month in pre-tax benefits for using mass transit, parking or car-sharing, either in the form of direct subsidies or purchasing passes with pre-tax dollars, thereby reducing taxable income. The increase was slipped into the stimulus bill in early 2009, matching the $230 in benefits employees received for parking.

For the Washington, D.C. area, federal employers directly pay for transit benefits of up to $230 a month; these benefits will also be curbed to $120.  Both increases in benefits are set to expire at the end of this year.  An estimated 285,000 workers in the Washington metropolitan area receive pre-tax transit benefits. Some officials fear a reduction in transit ridership as a likely consequence:

Metro officials fear that the changes will discourage riders by making it more costly and cumbersome to use public transit, causing a potential annual loss of 1.3 million to 3.8 million transit trips.

Additionally, when examined by fare level, about 30 percent of all transit users spend more than $120 per month on public transportation.  Plus, it is estimated that employees save $13.50 for every $50 in non-taxed income, and according to a TransitChek report, the impending cap will increase the cost of commuting by 22 percent. TransitCenter is also estimating that the increase in commuting costs is expected to reduce mass transit ridership by as much as nine percent among commuter benefit users.

The federal law can be applied for carpooling, public transportation and parking. Recently, bike benefits were added, totaling about $20 a month for bike repair and maintenance. But the benefit can’t be combined with other benefits for transit and parking and it is considered a fringe benefit, says Charles Kim, communications manager of TransitChek.

Does your employer provide any interesting commuting incentives?