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6 Things to Consider Before You Start Carpooling

Roughly three-fourths of Americans drive to work alone. It’s easy to understand why – driving solo means leaving your house and office on your own time, the ability to stop for any errand you like, or to catch up on the phone with colleagues, friends or family. But carpooling has its advantages too – namely, it could save you some serious dough.

Let’s say you commute 15 miles to and from work each day. With the IRS standard mileage rates at 57 cents per mile, you’re spending nearly $4,300 per year commuting. If you carpooled even half the time, the extra money could be used as you wish – to build up savings, pay down debt, budget for vehicle repair and maintenance or even to take a vacation. The argument for carpooling is a strong one.

Not sure you’re ready to take the plunge? Below are some tips worth considering as you figure out whether carpooling is right for you.

1. Split the Costs

Typically, carpoolers take turns driving. Whoever drives that day covers all expenses. If you drive a hybrid vehicle and your friend drives a gas-guzzling Ford F-250, you don’t have to worry about your friend’s extra consumption; you’re only responsible for your own vehicle.

Alternatively, you could offer to drive every day and pick up your passengers. In that case, everyone would reimburse you for the cost of riding in your car. The most convenient way to split the expense is to just charge people with a rate based on how far they are from work. If one friend lives 20 miles from work while the other only lives five miles away, adjust your price accordingly.

Exchanging cash (when so few people carry it) in a crowded car could get complicated. Instead, go digital. Pick a payment service you like best. PayPal, Venmo, Popmoney, Square Cash and Google Wallet are all worthy candidates. Avoid those pesky fees if possible. One way to do that? Ask your fellow carpoolers whether they have the same bank as yours; if so, there’s often no fee for payment transfers.

2. Get in the Fast Lane

According to the 2012 Urban Mobility Report, a rush-hour commuter spends an extra 38 hours in traffic per year. That’s nearly an entire workweek stuck in traffic! You opt out of at least some of that nightmare by carpooling. As a carpooler, you’re allowed to use the carpool lane, also known as the high-occupancy vehicle (HOV) lane, diamond lane or transit lane. Look for the white diamond painted on the road surface. You’ll be able to see the diamonds since the lane won’t likely be covered with cars. The normal minimum occupancy is two or three people.

3. Take Advantage of Better (Maybe Even Free!) Parking

Find out if your company has carpool parking spots, and if they don’t, suggest it. Carpool spots are often premier spots closer to the door. Some parking lots and garages even offer free parking for commuters as part of a green initiative or just to encourage people to patronize the surrounding businesses. There’s power in numbers.

4. You Won’t Owe Taxes on Carpool Payments

According to the IRS, you cannot deduct carpooling expenses. That’s a bummer. But you don’t have to pay income tax on money you receive from carpooling: it’s technically just reimbursement for things like gas and payment toward maintaining items that wear and tear on your vehicle, including replacing tires. You shouldn’t really be making a profit. If a lot of people join your carpool, you may inadvertently begin making more money than you need to cover expenses. If you begin actually earning money while carpooling, that’s income and you’d need to pay taxes on your accidental income stream.

5. Consider Selling Your Car

Perhaps you don’t want to drive; you just want to ride in a carpool. If you find one that is extremely reliable, consider selling your car. This makes sense if you have another vehicle in your household, are a member of a car-sharing service like ZipCar, or are within biking distance of your day-to-day activities. According to AAA, it costs a little more than $9,000 per year to own a car. Selling your car may be even better than getting that raise you’re always lusting after – it’s worth considering.

6. Check Your Insurance

Since you probably aren’t carpooling for profit, you don’t need to upgrade to a commercial insurance policy. However, you still may want to adjust your insurance. Why? You have a lot of passengers in your car, and most basic auto policies will only cover bodily injury up to $100,000. Low priced auto-insurance quotes usually don’t offer any better protection than the state minimum. If you’re regularly traveling with passengers and you were to get into an accident, you could easily be spending more than $100,000 in hospital bills. Contact a licensed insurance agent to determine how much coverage you need for your exact carpooling situation. You don’t want the threat of high hospital bills to negate the money you saved by carpooling.

Keep in mind that your car insurance company may check your credit as part of the application process. You may want to check your own credit beforehand to ensure that everything on your credit report is accurate and up-to-date. You can check your credit reports for free once a year under federal law and you can get two of your credit scores for free every month on

Even if you’re just a rider in the commuting carpool, you may also consider adjusting your insurance. Consider purchasing personal injury protection coverage. This will help to cover any of your medical bills, should the driver’s policy not carry adequate bodily injury coverage.

Carpooling is a smart way of saving money and doing your part to save the planet. Many states, cities, and companies are offering more and more perks for carpoolers. Cities like Sacramento even offer cash incentives for people who commute.

Carpooling can save you money, reduce wear and tear on your vehicle (if you’re splitting the driving) and give you some good company on your commute. All that’s left to do is figure out which radio station to play. But that’s another blog post altogether.

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