Taxation of a Company Car
There is generally no tax assessed to an employee who uses a company-owned vehicle solely for business purposes. For the company, the vehicle would be 100% deductible as an expense. Taxes are required if the vehicle is driven for personal use.
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Personal Use
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Personal use of a vehicle is any non-business use, including commuting, vacations, weekend use and miles driven by an employee's spouse or dependents. The Internal Revenue Service defines such use as a non-cash benefit, with taxes based upon the value of the benefit.
Recordkeeping
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Records for business and personal mileage are required. If records identifying the amount of business and personal use are not provided, the vehicle is considered wages to the employee. If records are provided, only the personal use is considered as wages for the employee.
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Personal Use Valuing
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Personal use will be included in wages on the employee's Form W-2. Compute the personal usage and apply one of four valuation rules. According to the IRS "Taxable Fringe Benefit Guide," choose the appropriate calculation from the General Valuation rule, Automobile Lease Valuation, Vehicle Cents-Per-Mile Rule, or the Commuting Rule. (IRS Treasury Reg. §1.61-21;d, e, and f).
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Comments
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What if you are on 24 hour call? As a Safety Manager I am required to be able to take off immediately if there is an emergency. For this purpose, I go everywhere in my company vehicle. For tax purposes, do I still have to claim my personal use mileage?
