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Employee Personal Use of Company Vehicles

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Many organizations purchase business use vehicles for their employees.  Organizations that own or lease vehicles for employee use must report the value of the employee's personal vehicle use as income on the employee's Form W-2. Here is what your organization should know about the reporting process.

Personal use of an employer-provided vehicle can include the following:

  • Commuting between a personal residence and work location (except for infrequent de minimis use, i.e., one day per month)
  •  Local transportation unrelated to the organization's trade or business (small personal detours while on business aren't considered     personal use)
  • Vacation or weekend use
  •  Use by individuals other than company employees


Employee use of "qualified non-personal use vehicles" is considered a working condition fringe benefit and not personal use. Qualified nonpersonal use vehicles include:

  •  Police, fire and public safety vehicles, both marked and unmarked
  •  Vehicles designed to carry cargo with loaded gross vehicle weight exceeding 14,000 pounds
  •  Delivery trucks with seating for the driver only
  • Flatbed trucks, qualified moving vans and qualified specialized repair trucks
    • Certain specially modified pickup trucks
    • Certain other special use vehicles


Record Keeping & Documentation


Detailed records documenting business and personal use should be maintained by employees for vehicles used both for business and personal purposes. Records should include mileage, date, destination and purpose for each trip. Absent detailed records to substantiate business use of the vehicle, the value of all automobile use must be included in the employee's W-2 compensation. If the employer includes the entire value of the vehicle use in the employee's compensation, the employee can claim miscellaneous itemized deductions for the part of the value substantiated as business use plus actual costs incurred in operating the vehicle for business purposes.

 

Automobile Valuation Rules

  • Cents-Per-Mile Rule - Standard mileage rate times Personal Miles driven
  • Lease Value Rule - Annual Lease Value table times Pesonal use percentage
  • Commuting Rule - One-Way commute fee (conditions apply)


There are three methods for calculating the value received by an employee for personal use of an employer-provided vehicle. The method selected depends on several factors, including the type of vehicle, its specific use, mileage and organizational policies and expectations. Contact us to help determine the best alternative to use.


Plan Ahead

Carefully drafted policies, maintenance of appropriate records and attention to rules for reporting the value of employee personal use of employer-provided vehicles can help avoid penalties for failure to comply.

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