Personal Use of Company Car based on IRS Cents-Per-Mile Rule
If you drive a company vehicle, this program calculates the value of the personal use of the vehicle using a fixed rate per mile, multiplied by the number of #personal miles logged. Certain conditions apply when choosing this program.
About this program
The personal use of a company car is considered a "fringe benefit" and subject to income tax. The value of the personal use must be included in your salary and is calculated, using this program, by multiplying the standard #business mileage rate by the total #personal miles. This is defined by the IRS as the Cents-Per-Mile Rule.
The cents-per-mile rate includes the value of maintenance and insurance for the vehicle, as well as the cost of fuel. If your employer does not pay for the fuel, you can reduce the rate by no more than 5.5 cents.
The value of any other service provided for a vehicle isn't included in the cents-per-mile rate. Use the general valuation rule to value these services.
How to use this program
Select this program within Psngr app for a company vehicle you use. You cannot use this program with a privately-owned vehicle.
Personal Use
Personal use is any use of the vehicle other than use in your trade or business. This amount must be included in the employee's wages or reimbursed by the employee.
You can use the cents-per-mile rule if either of the following requirements is met.
- You reasonably expect the vehicle to be regularly used in your trade or business throughout the calendar year (or for a shorter period during which you own or lease it).
- The vehicle meets the mileage test (see: "Conditions").
How this program works
When you select this program within Psngr app:
▪︎ Trips are logged (automatically) and expensed using IRS standard mileage rates. Specifically, trips tagged as #personal are expensed at the standard business rate, while #business trips have no expenses.
▪︎ Expenses cannot be logged for a vehicle using this program.
▪︎ Monthly and Annual reports are restricted to a single vehicle (i.e. the vehicle using this program) and include a summary calculation, as well as the list of trips logged during the report period.
Conditions
Maximum automobile value
You can't use the cents-per-mile rule for a vehicle (including a truck or van) if its book value exceeds a certain amount. The maximum amount is published by the IRS for each calendar year.
Vehicle
For the cents-per-mile rule, a vehicle is any motorized wheeled vehicle, including an automobile, manufactured primarily for use on public streets, roads, and highways.
Regular use in your trade or business
Whether a vehicle is regularly used in your trade or business is determined on the basis of all facts and circumstances. A vehicle is considered regularly used in your trade or business if one of the following safe harbor conditions is met.
- At least 50% of the vehicle's total annual mileage is for your trade or business.
- You sponsor a commuting pool that generally uses the vehicle each workday to drive at least three employees to and from work.
Infrequent business use of the vehicle, such as for occasional trips to the airport or between your multiple business premises, isn't regular use of the vehicle in your trade or business.
Mileage test
A vehicle meets the mileage test for a calendar year if both of the following requirements are met.
- The vehicle is actually driven at least 10,000 miles during the year, or a pro-rated number of miles if used only part of the year.
- The vehicle is used primarily by employees.
For example, if only one employee uses a vehicle during the calendar year and that employee drives the vehicle at least 10,000 miles in that year, the vehicle meets the mileage test even if all miles driven by the employee are personal.
Consistency requirements
If you use the cents-per-mile rule, the following requirements apply.
- You must begin using the cents-per-mile rule on the first day that the vehicle is made available to you. However, if you used the commuting rule at first, you can change to the cents-per-mile rule later.
- You must use the cents-per-mile rule for all later years, except that you can use the commuting rule for any year during which use of the vehicle qualifies under the commuting rules.
- You must continue to use the cents-per-mile rule if you receive a replacement vehicle (and the vehicle qualifies for the use of this rule) and your primary reason for the replacement is to reduce federal taxes.
Disclaimer
Psngr does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
Source: IRS publication 15-B