Not everyone knows that federal tax law lets employees pay for monthly commuting by public transit and for parking with pretax dollars, exempting those expenses from personal income tax. Because the rules are quite restrictive, this usually does not apply to popular rideshare apps like Uber and Lyft. But if you often use Uber to get to and from work, there is good news: through partnerships with companies such as WageWorks, Uber lets eligible riders use pretax salary to pay for UberPOOL rides, saving the income tax on that portion of your pay—effectively like getting roughly 20% to 30% off.

What kind of Uber ride qualifies for the tax benefit?

Anything involving taxes tends to get complicated quickly. 26 U.S.C. § 132 (a) (5) grants tax-free treatment to a "qualified transportation fringe."
A "qualified transportation fringe" includes subway, public transit, vanpooling, and parking, among other things. The term "Vanpool" is defined in 26 CFR 1.132-9 (b) (3). To save space, we will not quote the full text here. In short, a tax-free vanpool service must be paid transportation provided by a vehicle with seating for at least six passengers, not including the driver.

UberPOOL service with pretax income

In general, most UberPOOL rides on the street are provided by ordinary drivers using their own cars, and seven-seat vehicles are relatively uncommon. To meet the legal requirements, if you want to use tax-free UberPOOL for commuting, Uber will automatically try to match you with an eligible UberPOOL vehicle that has seating for at least six passengers.

Can I use pretax income to pay for UberPOOL?

Your employer must offer at least one of the following Commuter Cards:

  • Beniversal Prepaid Mastercard®
  • Commuter Check Prepaid Mastercard®
  • eTRAC Prepaid Mastercard®
  • Flex Benefits Visa® Card
  • Flex Facts Commuter Benefits Card
  • GoNavia Transit Benefit Card
  • Gusto Benefits Debit Mastercard®
  • Igoe Administrative Services Benefits Card
  • MyAmeriflex Mastercard®
  • NBS Smart Card®
  • PayFlex Card® Debit Mastercard®
  • Pension Dynamics Company Benefits Card
  • TransitChek QuickPay Prepaid Visa® Card
  • WageWorks Commuter Prepaid Mastercard®
  • WageWorks Visa® Prepaid Commuter Card
  • WEX Health Payment Card
  • Zenefits Debit Mastercard®

A "Commuter Card" is a payment card that looks much like a Visa debit card. Although it works similarly to a bank-issued Visa Debit card, its merchant categories are restricted: you cannot use it at a grocery store, for example; it can only be used to pay eligible transit-related expenses. The balance on this card is usually funded based on the amount you choose, automatically deducted from your paycheck and deposited into your Commuter Card account. There is a monthly limit of $255; you cannot contribute more than that or spend more than that. (the maximum monthly contribution is $265 in 2019.)

If you do not know how to get this card, check your company intranet under HR or Benefits, or contact the relevant department directly. Many large companies offer this benefit. Before using it, also make sure your account has enough balance to cover your ride fare. Since funding this account can be a bit of a hassle, we recommend setting it up as early as possible.

How do I join this program?

You can refer to Uber’s official explanation:

Setup is fairly simple: just add your Commuter Card as a payment method in Uber, and make sure to choose "Commuter Benefits" rather than credit/debit card. Once that is done, setup is complete.

What is the experience like?

Before requesting an UberPOOL, be sure to check that the payment method shown at the bottom of the app is your Commuter Card. When you request the ride, Uber will send an UberPOOL vehicle that meets the legal requirements.
Because these qualifying vehicles are relatively rare on Uber, wait times can be very long unless you are in an area with especially high commuter density, such as Manhattan in New York, the Financial District in San Francisco, or downtown Los Angeles. Waiting more than 20 minutes would not be unusual. If you want to save money this way, be prepared to wait.

Do I have any other options?

In recent months, Uber has rolled out Uber Plus Pass in many major cities. Roughly speaking, you pay a fixed activation fee—around $10-$20—and can then lock in Uber pricing for a certain number of rides. Each ride generally costs only about $2 to $5.

Overall, Uber Plus Flat Rate Pass may be a cheaper option, with discounts large enough to offset the tax advantage here. However, these passes are sold monthly, pricing keeps changing, and supply is limited, so if you are not quick, you may not be able to get one. It is hard to predict how this may change in the future. So we recommend prioritizing Uber Plus Pass first, and using the tax-free UberPOOL option here only if that does not work out.

In addition, following our site’s Uber deal roundup may lead to some pleasant surprises: