Discussion:Value of co. auto to employee
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Discussion Forum Index --> Tax Questions --> Value of co. auto to employee
| 28 August 2006 | |
| Hello everyone and thanks in advance for the help.
Client has an employee who has 100% use of a co. vehicle. Uses it for business, personal, commuting. In trying to figure her compensation or the value of same, he wonders what dollar value can be put on the use of that vehicle, i.e. how much of a benefit($) is she getting from this vehicle use? I'm aware that there is some number of cents per mile that it costs to run a car, but not sure of the number or if it includes gas (which she is providing). Ideas? | |
| 28 August 2006 | |
| The mileage reimbursement includes gas. It also includes ALL expenses which could be considered to be a use of a vehicle. Her personal use of the company vehicle is compensation to her. Is the vehicle leased or is it owned? Is the vehicle being depreciated? Are expenses being written off for the vehicle such as repairs/gas reimbursements, etc? | |
| 28 August 2006 | |
| Refer to IRS Publication 15b. There are a number of methods that may be used. If you use the Annual Lease Value method (Pub 15b, page 19) it involves determining the annual lease value from a table in the pub, multiplying the lease value times the personal use percentage. The table assumes maintenance and insurance are paid by the employer. Employer-provided gas must be added at the rate of 5.5 cents per personal mile driven. Example: $20,000 auto has annual lease value of $5,600. Assuming 10,000 total miles including 2,000 personal miles driven, the lease value to be charged to the employee is $1,120. Employer-provided gas adds 2,000 X .055 = 110. In your case, the employee appears to be providing her own gas, so the latter part of the calculation is not required. (The method begs the question of whether the annual lease value can be reduced for employee provided gas that was used for business miles driven). | |
| 29 August 2006 | |
| Thanks for the extensive answers. I understand the personal use and annual lease value and other such tax implications to the EMPLOYER, but client wants to know(if there is a way to know)what the dollar benefit is to the EMPLOYEE, i.e. he wants to add this benefit to her salary to determine what her real total compensation is. He might give her a raise but needs to know the above to see what she is really making when you add the true(not tax) benefit of using the company vehicle. Thanks much. | |
| 29 August 2006 | |
| I would suggest the IRS calculation is a reasonable approximation of the value received. The calculation assumes a 4 year lease. Thus, an employee driving a $20,000 vehicle, using it 20% for personal use would receive $1,120 of value for being able to drive the company vehicle.
At the start of year five, figure out a new FMV of the vehicle and look at the chart to figure the new annual lease value and start over. | |
| 1 December 2007 | |
| in jdugancpa example above what is the employers auto deduction??? | |
| 1 December 2007 | |
| Whatever the auto expense incurred by the corp is is what the deduction to the corp is. The calculation of personal use doesn't really affect the auto expense, unless the credit gets posted to that account. Debit compensation expense $1120 (or debit stockholder loan, or debit S distributions) credit misc income. As long as the personal use gets dinged into someone's taxable income the auto is considered 100% business use and therefore is fully deductible to the corp. | |
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