How to Save Taxes on Personal Use of Company Car

How to Save Taxes on Personal Use of Company Car
Photo by Tim Mossholder / Unsplash

What is the "personal use" of a company car?

When you drive a company car, the "personal use" is the mileage you drive for personal purposes and is considered a benefit in kind, or extra income, from a tax perspective. As such, the "value" of the private use of the company car is added to your annual income and increases your tax liability.

Normally, rides you make from home to your primary place of work are considered "personal use". But if you do not have a "primary place of work" or your office is at your home, and if you otherwise use your company car primarily for work-related purposes, then you might be overpaying taxes on the "personal use" of your company car.

How is "Personal use" determined?

If you do not provide sufficient evidence on the usage of the company car, the tax authority assumes that you drive the car only for personal purposes. For example, under IRS general rules, all use of a company car is considered personal use unless the employee documents the business use of the car. This results in taxable wages for the employee.

It is therefore recommended to log the mileage of your company car, as evidence of the business vs. personal use of the car. More often than not, your mileage logbook will help you save money by reducing the taxable wages on the personal use of the car. This, of course, depends on the tax regulations in your country. Consult with your accountant and find out if you may benefit from keeping a mileage logbook for your company car.

Shared company car

When you share your company car with other drivers (spouse, children, or colleagues), logging mileage for determining the "personal use" of the vehicle can become more complex, as each ride must be documented, regardless of the driver who made it. Psngr Mileage Tracker offers an elegant solution to logging the mileage of a shared vehicle.

Psngr Family

Psngr app offers a Family subscription that allows 2 or more drivers to share a team account and log all drives to a single vehicle logbook.

Here's how it works:

  • Upgrade your Psngr account to Psngr Enterprise, and select the Family plan. This creates a team in your account and allows you to add drivers.
  • Order Psngr Beacon and plug it in your vehicle. The beacon is the digital ID of your vehicle and will allow the app to detect and log each ride with the vehicle.
  • Invite additional drivers to join your team. You can do this in the app via Settings > Teams.
  • When a new driver joins, you'll receive an email. Open Psngr app and add the new driver to your vehicle. You must complete this step in order for the new driver to be able to log rides with your vehicle.
  • Psngr app will now log all rides with the vehicle, identifying the driver of each trip.
  • Your monthly report will include all rides made with the vehicle, by all drivers. The PDF report export will also include the mileage breakdown of business vs. personal.

For more info about Psngr Enterprise / Family subscription, visit your Subscription page.