Posted on June 21, 2006 at 17:55:04:
Many fringe benefits or perks are deductible by the company and tax free for the employee, but not personal use of a company car. Anything beyond nominal use is reported as income to the employee.
What valuation method to use? Fair market value of a comparable lease is one option. Another is annual lease value, as listed by the IRS; this may cost the employee substantially more. The company can include only the employee’s personal use of the car – usually the wiser choice for both company and worker – or list the total value of the car and let the employee deduct business use as a miscellaneous itemized deduction on his personal return.
Personal use of the company car can also be charged on a cents-per-mile basis, but this is not available to “control” employees or for more expensive cars. It’s also expensive for an employee whose personal use is high. Other methods, more limited in use, include commuting value of personal use or fleet-average value.