The author requests an UberPool using a smartphone. Josh Wolff / Business Insider
The mass transit I took to Brooklyn the other night came in the form of a gray Toyota minivan.
It sure didn’t seem like mass transit: my colleague and I filled the middle row, and for most of the rush-hour journey crawling over torn up Greenwich Village streets and then coasting across the Manhattan bridge, it was just the two of us and the driver and four empty seats.
Comfortable, but hardly efficient.
I was in an UberPool, the ride-hailing company’s service that picks up passengers heading in the same direction, adding extra pickups and drop offs – and generally some small talk –but saving everyone on board money. It felt like a fancy way to get to a part of the city well served by subways.
UberPool automatically sends a bigger vehicle if you use a WageWorks card, even though some of those seats won't be filled. Dan Bobkoff / Business Insider
But here's what made it remarkable: I had managed to pay for this ride using pretax deductions from my paycheck, just like someone taking the subway or bus might.
This tax break, which Uber has been offering riders for just over a month, saved me about $5 on this $18 ride. But in a city teeming with buses and subways and cars and taxis, I wondered how it was possible the IRS was happy with me paying for an Uber as a kind of deduction, especially when taxis and other cars don't get the same treatment.
The answer has a lot to do with what the IRS considers "transit," and explains why I rode in such a big vehicle with so many empty seats. And it’s the story of Uber finding a way to take advantage of a law written pre-internet to gain another edge over the city’s traditional taxis.
How is this allowed?
Taxi riders don’t get tax breaks. Nor do people who drive to work, except for their parking.
Regular carpools also get no break.
But for years, workers have been able to use pretax dollars to pay for subways and buses, and to save on bicycles, but it’s only been since August 30 that UberPool riders in New York City could do the same.
It came through a deal between Uber and WageWorks, a company that administers transit benefits for employers ( including Business Insider ).
The government allows workers to set aside up to $255 each month to pay commuting costs, and New Yorkers using a WageWorks debit card can use those dollars to pay for trains and mass transit passes.
A few months back, Uber and WageWorks started talking about ways to let WageWorks customers pay for Ubers. They realized that through a quirk in the law, they might be able to call UberPool a "transit pass," just like a MetroCard is for the subway. But there was a problem. Uber drivers use lots of different kinds of vehicles, but only some qualify as "transit."
IRS rules – for reasons that long predate anything like Uber – mandate that pretax dollars be used only in vehicles that can seat at least six passengers. Only some Ubers are big enough.
"They can’t just take their regular Uber fleet and any of those cars for UberPool," Dan Neuberger, WageWorks’ president of commuter services, told Business Insider.