Taking Uber can now be tax-free: here's why

August 31, 2016

Uber is many things to many people:

Now, Uber is also tax-free--at least for some commuters in New York City. 

Commuter tax benefits

Larger corporations offer a range of perks to their employees, including what are known as "commuter tax benefits". Those benefits take the form of funds that workers use on buses, carpools, and other means of transportation to help them get to and from the office. Like medical insurance, matching 401k contributions, and other benefits, such funds are exempt from taxes.

Commuter tax benefits were written into law back in 1993 to encourage workers to take mass transit. Guidelines dictate what sort of vehicles are eligible for the benefits, and in the case of highway vehicles, the IRS has this to say:

"A commuter highway vehicle is any highway vehicle that seats at least 6 adults (not including the driver). In addition, you must reasonably expect that at least 80% of the vehicle mileage will be for transporting employees between their homes and work place with employees occupying at least one-half the vehicle's seats (not including the driver's)."

Uber's carpool service, known as uberPOOL, meets those guidelines, and the company has amassed enough uberPOOL vehicles in New York City to offer the service as part of commuter tax benefits programs. Eligible employees simply open the Uber app and add whatever form of payment their company provides like a prepaid MasterCard or Visa. Then, they use that payment to hail an uberPOOL or ($5 Pool, if they're in Manhattan) on their daily commute.

The program is currently limited to workers in New York City who are employed by companies that use WageWorks to manage commuter tax benefits. If it takes off, though, expect to see other cities and benefits providers added to the list soon.

Generally speaking, Americans aren't keen to buddy-up on their commutes. Given how crazy people are about Uber, though, carpooling could become the next big thing.

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