Personal Use Taxable Benefit: Finding an equitable balance

January 27, 2010

Recommended by 6 People

By Terri Houck
Supervisor/Technical Business Analyst
Driver and Vehicle Reporting Services
PHH Arval

Personal use of company vehicles is a policy that should undergo review on a regular basis. One aspect of this policy is assessing the taxable benefit of personal use. Begin by considering the two biggest questions:

1. Should I charge my drivers for the personal use of their company-provided vehicle?
2. If yes, what should I charge my drivers for the personal use of their company vehicle?

The monthly driver charge-back is two-fold. First, to make sure the driver's tax liability is covered and secondly, to help offset your fleet expenses.

Your goal is to reach an equitable amount that benefits both the driver and the company. To do this, you'll need to look at your drivers' average percentage of personal use.

For example:

If the average percent of personal use per year is 10% and the average number of personal miles driven per year is 2,400 (24,000 x 10%) the taxable benefit amount would be calculated as follows:

24,000 miles per year with 10% personal use = 2,400 personal miles

Gas Benefit 2,400 x .055 = $132.00

ALV Benefit $5350.00 x 10 = $535.00

Total taxable benefit = $667.00

Deduct the driver's monthly contribution ($75.00 x 12 months) = $900.00

Net reportable benefit of ($667.00 - $900.00) = -$233.00 

Note: this is a credit amount so the driver's taxable benefit is $0.00. The IRS says that the company can keep the difference to offset fleet expenses. 

In today’s environment, companies really should be charging for Personal Use. Most importantly, the amount charged should be at a rate that fairly compensates the company.

Tags:   Cost Management , Used Vehicles

Name

EMAIL
(not published)

Comment

Enter the letters you see in the image.

Click to get a new image.