Changes to Rules on Personal Use of Company Autos May Simplify the Calculation for Construction Businesses

By on July 16, 2019

From RubinBrown’s ViewPoints Construction Services Blog:  The free use of a company vehicle is a great perk an employee may receive as part of a compensation package. This type of perk is especially valuable in the construction industry as contractors and builders are constantly traveling from job to job.

However, this benefit isn’t completely free under current tax law – the personal use is treated as a taxable noncash fringe benefit, subject to income taxes.

The calculation of the amount to include in taxable income can be a very time-consuming endeavor. The annual lease value (ALV) of each vehicle must be determined, based on IRS tables using the fair market value (FMV) of the vehicle when it was first placed in service and the number years the vehicle has been in service. This value is then multiplied by the percentage of personal miles to total miles driven during the year.

For companies with 20 or more vehicles, the Fleet-Average Method can be used to simplify the taxable income calculation. The average FMV of all of the company owned vehicles is used to calculate the annual lease value of all of the vehicles in the fleet, instead of pulling the ALV for each vehicle individually.

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