Whether your company supplies business vehicles to employees as “perks” or as necessary tools to help get their work done, their personal use of the vehicle has tax implications. An employee’s personal use of a company vehicle generally must be treated as a non-cash fringe benefit that is also subject to social security taxes. Fortunately, the tax rules give you some flexibility in valuing personal usage of a company vehicle.
You can choose from among four valuation methods:
- The general fair market value method, which is based on what a person would pay locally to lease a comparable vehicle for a period of time comparable to the period of time the employee has use of the vehicle;
- The lease value method, which assigns an IRS-determined annual lease value to the vehicle depending on its value when first provided for the employee’s personal use;
- The mileage rate method, which values each personal-use mile at the standard business mileage rate designated by the IRS; or
- The $1.50 per one-way commute method.
The first two methods can be used for any vehicle and any employee.
The mileage-rate method can be used only if:
- the vehicle’s fair market value doesn’t exceed $15,900 for 2012 (truck and van limits are $16,700 for 2012) and is used regularly in your business; or
- it is driven at least 10,000 miles during the year and used primarily by employees.
The $1.50 commute method applies only to vehicles owned or leased by the company, and used in your company’s business. This method may only be used for vehicles covered by a written policy allowing commuting and no other personal use.
The commuting method does not apply if the employee is highly paid, a company officer, director, or a more than 1% company owner.
Included are worksheets in Exhibits A, B, C and D to assist you in calculating the personal use amounts. Please do not hesitate to call us if you are unsure which method to use. If you have already adopted one of these methods, please contact us prior to changing your method because this change may need to be approved by the IRS.
If you should have any questions regarding this, please do not hesitate to contact our office.
EXHIBIT A
2013 ANNUAL LEASE VALUE TABLE
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Automobile Fair Market Value Annual Lease Value |
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$ 0 to 999…………………………………………….………………………$600 1,000 to 1,999…………………………………………………………………… 850 2,000 to 2,999…………………………………………………………………..1,100 3,000 to 3,999…………………………………………………………………..1,350 |
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4,000 to 4,999…………………………………………………………………..1,600 |
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5,000 to 5,999…………………………………………………………………..1,850 |
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6,000 to 6,999…………………………………………………………………..2,100 |
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7,000 to 7,999…………………………………………………………………..2,350 |
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8,000 to 8,999…………………………………………………………………..2,600 |
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9,000 to 9,999…………………………………………………………………..2,850 |
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10,000 to 10,999…………………………………………………………………..3,100 |
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11,000 to 11,999…………………………………………………………………..3,350 |
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12,000 to 12,999…………………………………………………………………..3,600 |
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13,000 to 13,999…………………………………………………………………..3,850 |
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14,000 to 14,999…………………………………………………………………..4,100 |
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15,000 to 15,999…………………………………………………………………..4,350 |
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16,000 to 16,999…………………………………………………………………..4,600 |
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17,000 to 17,999…………………………………………………………………..4,850 |
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18,000 to 18,999…………………………………………………………………..5,100 |
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19,000 to 19,999…………………………………………………………………..5,350 |
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20,000 to 20,999…………………………………………………………………..5,600 |
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21,000 to 21,999…………………………………………………………………..5,850 |
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22,000 to 22,999…………………………………………………………………..6,100 |
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23,000 to 23,999…………………………………………………………………..6,350 |
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24,000 to 24,999…………………………………………………………………..6,600 |
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25,000 to 25,999…………………………………………………………………..6,850 |
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26,000 to 27,999…………………………………………………………………..7,250 |
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28,000 to 29,999…………………………………………………………………..7,750 |
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30,000 to 31,999…………………………………………………………………..8,250 |
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32,000 to 33,999…………………………………………………………………..8,750 |
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34,000 to 35,999…………………………………………………………………..9,250 |
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36,000 to 37,999…………………………………………………………………..9,750 |
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38,000 to 39,999…………………………………………………………………10,250 |
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40,000 to 41,999…………………………………………………………………10,750 |
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42,000 to 43,999…………………………………………………………………11,250 |
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44,000 to 45,999…………………………………………………………………11,750 |
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46,000 to 47,999…………………………………………………………………12,250 |
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48,000 to 49,999…………………………………………………………………12,750 |
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50,000 to 51,999…………………………………………………………………13,250 |
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52,000 to 53,999…………………………………………………………………13,750 |
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54,000 to 55,999…………………………………………………………………14,250 |
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56,000 to 57,999…………………………………………………………………14,275 |
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58,000 to 59,999…………………………………………………………………15,250
For vehicles having a fair market value in excess of $59,999, the annual lease value is equal to: (.25 x the fair market value of the vehicle) + $500. |
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EXHIBIT B
2013 VEHICLE USAGE REPORT
(To be completed by All Employees using Company Owned or Leased Vehicle(s))
Employee Name __________________________________
The personal use of company owned or leased vehicles is a taxable fringe benefit. The amount of the benefit must be computed each year in accordance with Internal Revenue Service Regulations. The value of the fringe benefit will be included as additional compensation on your 2012 Form W-2.
To assist in complying with the law, the following information for 2013 usage must be documented. Your response should be returned as soon as possible.
- The number of business miles driven (your business miles do not include commuting to and from work). __________________
- The number of commuting miles driven. _________________
- The number of personal (other than commuting) miles driven. ________________
- The total number of personal miles (sum of lines 2 and 3). _________________
- The number of miles you drove the company vehicle during the year (sum of lines 1 and 4). ____________________
- Did you have a second personally owned vehicle available for personal use?
Yes ____ No _____
- Did you maintain written records to document your business and personal use?
Yes ____ No _____
- Do you wish to have federal and state income taxes withheld from your pay based on the taxable fringe benefit amount? Yes ____ No _____
____________________________ ____________________________
(signature) (date)
FOR COMPANY USE ONLY
Period vehicle used by employee during year From: _____________ To: ______________
Type of Vehicle (Year/Make/Model) ___________________________________________
Date Vehicle Purchased by The Company ______________________________
Original Cost __________________
Gasoline Paid by Employer: Yes ______ No _____
EXHIBIT C
WORKSHEET TO CALCULATE INCOME FROM PERSONAL USE OF COMPANY VEHICLE
EMPLOYER’S WORKSHEET TO CALCULATE EMPLOYEE’S TAXABLE
INCOME RESULTING FROM EMPLOYER-PROVIDED VEHICLE
FOR CALENDAR YEAR 2013
| Employee: _____________________________________________________________ |
| Description of Vehicle: ___________________________________________________ |
| Date Vehicle First Made Available To Any Employee: ______________ |
| Date Vehicle First Made Available To This Employee: ______________ |
Select one method (note limitations on methods II and III)
METHOD I – ANNUAL LEASE VALUE METHOD (For Vehicles Available 30 Days or More)
- Fair market value of vehicle (predetermined at the beginning of the first year and every 4th year thereafter). $______________
- Annual lease value, per attached chart (Exhibit A) ________________
- Enter number of days during the year that the vehicle wasavailable (see note 1) x ________________
- Divide step 3 by number of days in tax year (365) ________________
- Prorated annual lease value (multiply step 2 by step 4) _________________
- Personal use % (personal/total miles, per statement from Employee Exhibit B) _________________%
- Personal annual lease value (step 5 x step 6) __________________
- If fuel is provided by employer:Multiply personal miles by 5.5 (see note 2) __________________
Personal use taxable income (step 7 + step 8) __________________
(1)For autos available for 7 days or less, multiply the annual lease value by 4. If the availability is more than 7 days, but less than 30, the taxpayer may elect to use the annual lease value without the 4 multiplier.
(2)If fuel is provided “in kind,” the fair market value may be determined based on all facts and circumstances or, alternatively, at 5½ cents per mile if auto usage is within the U.S., Canada, and Mexico. Generally, where fuel is purchased and charged to the employer, the actual cost or reimbursement should be used. If employers with a fleet of 20 or more vehicles reimburse or allow employees to charge fuel cost, the fleet-average cents per mile may be used. If the fleet employer determines that actual cost or fleet average methods are unreasonable administrative burdens, the 5½ cents per mile may be used.
EXHIBIT D
WORKSHEET TO CALCULATE INCOME FROM PERSONAL USE OF COMPANY VEHICLE
EMPLOYER’S WORKSHEET TO CALCULATE EMPLOYEE’S TAXABLE
INCOME RESULTING FROM EMPLOYER-PROVIDED VEHICLE
FOR CALENDAR YEAR 2013
METHOD II – STANDARD MILEAGE RATE METHOD
Generally, in order to qualify to use the cents-per-mile method, the vehicle must: (1) be expected to be regularly used in the employer’s business throughout the calendar year, or (2) be driven at least 10,000 miles per year, and (3) have a fair market value of $15,900 or less for passenger automobile or $16,700 or less for a truck or van. Once this method is adopted for a particular vehicle, it must be continued until the vehicle no longer qualifies.
| Enter personal miles _____________ x $0.555 for 1/1 – 12/31/13 = $________________ | |||
| Deduct:If fuel is NOT provided by the Employerenter personal miles____________ x $.0555 = (_________________) Personal use taxable income $ __________________ | |||
METHOD III – SPECIAL COMMUTING METHOD
This method may only be used for vehicles covered by a written policy that allows commuting but no other personal use. DO NOT USE if employee is a 1% or more owner, an officer or board member with compensation equaling or exceeding $95,000, an individual with compensation equaling or exceeding $195,000, or who is a director.
| Number of commuting round trips made ________________ | |
| Value per round trip | x $ 3.00 |
| Personal use taxable income | $ _______________ |