November 29, 2018
Whether your company supplies business autos to employees primarily as "perks" or as necessary tools to help them get their work done, their personal use of the auto has tax implications for them and for you. That's because an employee's personal use of a company auto generally must be treated as non-cash taxable fringe benefit that is also subject to social security taxes. Fortunately, the tax rules give you some flexibility in valuing personal usage of the company car. You can choose from among four valuation methods:
You cannot use the mileage rate method for an automobile (any four-wheeled vehicle, such as a car, pickup truck, or van) if its value when you first make it available to any employee for personal use is more than an amount determined by the IRS as the maximum automobile value for the year. For example, you cannot use the cents-per-mile rule for an automobile that you first made available to an employee in 2017 if its value at that time exceeded $27,300 for a passenger automobile or $31,000 for a truck or van.
You can only use the commuting method if all the following requirements are met.
The best method for your situation will depend on factors such as the number of annual personal miles driven, value of the car, and the ratio of personal miles to total miles. We can help you through the maze of these rules, and also show you which of them will cause the least amount of paperwork. Please do not hesitate to call us for an evaluation.
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