The personal use of employer-owned vehicles by employees or owners must be treated as taxable compensation, subject to normal payroll taxes. Under the general rule, the value of this compensation equals the cost to lease a comparable vehicle in an arm’s-length transaction for the period of personal use.
The IRS allows three simplified special valuation methods:
Annual Lease Value Method
Cents-Per-Mile Method
Commuting Valuation Method
These special rules often produce lower taxable values than the general rule, which may reduce FICA taxes for employers and both income and FICA taxes for employees.
If you use any of these special valuation methods, we recommend reviewing the applicable regulations to ensure full compliance. Our office would be pleased to assist you with this review.
If you have questions or would like additional information, please call our office at (724)731-0150.
