Transport and mobility are fundamental to the economy and societies, for the markets, and generally for the quality of life of the citizens. Today, due to the increasing levels of individual transport, cities suffer most from congestion, poor air quality and noise exposure, which are increasingly challenging urban and transport planning paradigms. However, there is limited evidence of urban transport systems becoming more sustainable, raising the question on how can sustainable transport transitions be initiated. Recent research indicates that urban transport transitions ultimately require new urban transport cultures, favoring other identities to individual transport. Policy instruments could and should carry its responsibility in promoting a wide variety of travel modes, and favoring those that have the least harmful impacts on the environment, and that possibly have positive effects on public health. At the national level, income tax is generally the key policy instrument affecting the commuter transport behavior. However, very limited attention has been paid to the socio-economic and sustainability potentials of creating these tax instruments. In Denmark, close to a third of all car trips are 5 km or less, while more than half are less than 10 kilometers, which shows the potential to move commuters from car to bicycle and public transport. With the right tax incentive structures this could potentially be achieved. In light of the above mentioned, and with an emphasis on the urban context, the main focus of this thesis is on assessing the socio-economic and sustainability potential of the Danish commuting tax, and find how can it be adapted to respond the sustainability goals the Danish Government have set out for the transport sector. To answer this a socio-economic model was created to assess the potential impacts of adjusting the Danish commuting tax to the Government's goals for the transport sector, through a cost-benefit analysis that simulates different tax variations in different scenarios. After calculating the generalized travel cost from each transport mode, the model compares the different travel costs against each other’s, before and after the application of different tax deduction rates. In absolute terms, scenario 5 is considered to be the one that better fulfills the sustainability goals from the Danish Government. Since it reduces the commuting costs for both bicycles and public transport, and increases the costs for the private modes - where the user has to pay for the full amount of the commute - therefore promoting better mobility, less congestion, reduction in GHG and carbon emissions, increase the amount of passengers transferred from private cars to public transport and bicycle, and finally changes in the commuting behavior. However, there are some limitations to the presented outcomes, due to the model characteristics. Overall, the model makes evident the socio-economic advantages, for the user, in shifting from the car to the bicycle or public transport in his daily commute, providing therefore, the economic justification for the adjustment of the current commuting tax system. Furthermore, this model constitutes a great baseline for the exploration and research of the social, economic and environmental impacts that tax incentives can promote towards a more sustainable commuting behavior, transport sector, and future.