If you work for a company that provides you with a company issued vehicle there are some tax provisions you need to be aware of.
When using your company-owned vehicle for personal use the value of that personal use must be included as taxable income on that employee’s W-2. Under the general rule the taxable amount equals the fair market value (FMV) of the total use minus the amount the employee pays for the use minus the amount excluded from income as a working condition fringe benefit.
Valuing the Vehicle
Rather than using actual costs there are several methods allowed by the IRS to value the vehicle. One method commonly used is the cents-per-mile valuation method. Under this method the taxable use of your vehicle is determined by multiplying the employee’s personal miles by the current standard mileage rate of 56.5 cents per mile for 2013. This rate includes the entire cost of operating/maintaining the vehicle including the cost of fuel. If the employee pays for the cost of fuel the cents-per-mile rate can be reduced by 5.5 cents per mile. An employer can calculate the personal use value of a vehicle under this method if all of the following are true:
- The employer reasonably expects the vehicle will be used on a regular basis in the employer’s trade or business. The vehicle is considered regularly used if at least 50% of the vehicle’s total annual mileage is for business or the vehicle is used each workday to transport at least three employees to and from work in an employee-sponsored commuting vehicle pool.
- The vehicle is driven at least 10000 miles per year and the vehicle is primarily used by the employee.
- The FMV of the vehicle at the time it is first made available to the employee for personal use does not exceed the luxury vehicle limits of Section 280F.
2013 New Limits. There are two separate Section 280F limits for passenger autos and trucks or vans first used by the employee in 2013.
- $16000 for a passenger auto
- $17000 for a truck or van
If you have questions about calculating the use of your company-owned vehicle Lindemeyer CPA will be glad to answer any questions you might have about your taxes or your vehicle taxation for this year. Contact us and get the answers you need.