If I drive a company vehicle, is that considered a taxable benefit?

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If I drive a company vehicle, is that considered a taxable benefit?

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byJack Kiperman
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Employer Vehicle Used for Business Purposes Only

If an employer provides a vehicle that an employee uses exclusively for business purposes and the substantiation requirements are met, there are no tax consequences or reporting required for that use. The use is treated as a working condition fringe benefit.

Business use does not include commuting. Employees should maintain records to substantiate that all vehicle use was for business.

Employer Vehicle Used for Both Business and Personal Purposes

If an employer-provided vehicle is used for both business and personal purposes, substantiated business use is not taxable to the employee . Personal use is taxable to the employee as wages.

What is Personal Use?

Examples of taxable personal use of an employer-provided vehicle include:
„1. Commuting between residence and work station
„ 2. Vacation or weekend use
„ 3. Use by spouse or dependents

De Minimis Nontaxable Personal Use

An exception to the limitation on personal use applies for use that qualifies as de minimis. Examples of excludable de minimis use of an employer-provided vehicle include:

„ 1. Small personal detour while on business, such as driving to lunch while out of the office on business.

„ Infrequent (not more than one day per month) commuting in employer vehicle. This does not mean that an employee can receive excludable reimbursements for commuting 12 days a year. The rule is available to cover infrequent, occasional situations.

Please see IRS Publication 5137 for more information.

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