Under the new tax law, a vehicle provided to an employee for personal use is subject to income tax obligations. Personal use of a company car is considered a noncash fringe benefit that is taxable.
If an employer provides an employee with a vehicle that is available for business and personal use, the value of the personal use must be included in the employee’s wages and income. This can be valued using the cents-per-mile or fleet-average valuation rule (FAVR).
For 2019 the IRS is providing interim guidance because current regulations have not been updated to reflect changes under the Tax Cuts and Jobs Act. Once the regulations have been amended, the annual publication of the standard mileage rates for business, charitable, medical and moving expense will include the maximum value for use with cents-per-mile and fleet-average valuation rules.
The “perk” of a company-owned vehicle for employee use is a way to reward and retain key employees. It is always important to consider all the tax complexities with your tax advisors regarding personal use of a company vehicle. Employees need to adhere to tax law guidelines and meet reporting requirements. We can help! The professionals in our office can answer the questions you may have on company-owned vehicles, call on us today.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.