More companies are using vehicle-related benefits to attract new employees, so now’s a good time to review the applicable IRS tax rules.
According to a 2015 survey from WorldatWork, 25% of companies featured the benefit to draw in potential employees.
That’s up from 20% in 2011.
Providing an automobile for an employee to use is one type of fringe benefit that’s jumped up in popularity from 2011 to 2015.
You can use the general valuation rule – i.e., the fair market value – to determine what amount to include in an employee’s income.
Or here are three other rules you may be able to use to determine the value of the fringe benefit.
Driving for personal use
With the cents-per-mile rule, you multiply the standard mileage rate by the total miles the employee drives the vehicle for personal use, which is non-business use.
Proceed with caution: You can’t use this rule if the automobile’s value when you first make it available to the employee exceeds the maximum vehicle value for that year. That’s $16,000 for a car and $17,500 for a truck or van for 2015.
As for the standard mileage rate, that’s 57.5 cents per mile for 2015.
Note: We’ll keep you posted on these rates for 2016.
The commuting rule may be an option if the employee uses a vehicle to travel from home to work or work to home.
Simply multiply each one-way commute by $1.50.
Be careful: If more than one employee uses the vehicle, use the formula for each employee.
Another option for valuing the fringe benefit is the lease value rule. That involves three steps:
- Determine the fair market value of the automobile on the first date it is available to any employee.
- Use the IRS Annual Lease Value Table, available in Publication 15-B.
- Out of total miles driven by the employee, find the percentage of personal miles, and multiply that by the annual lease value.