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Reporting of Personal Use of Company Vehicles

Kortney Redick CPA and Abby Spurlock

If your company owns vehicles that are used by employees for personal purposes, it is generally a taxable fringe benefit and must be reported on the employee’s W2. This amount is subject to income and employment taxes.
What is personal use?
Personal use of a company vehicle includes the following:
1)Any trip that is part of the employee’s regular commute – which is the travel from home
to work and work to home
2)Any trip unrelated to the business, or any trip without a business purpose
3)Any use of the vehicle on the employee’s days off or vacation
4)Any use of the vehicle by someone other than the employee
How to calculate the taxable benefit of personal use:
There are two primary options for calculating the taxable benefit of personal auto use.

Under this rule, multiply the annual lease value of the car by the % of personal miles driven.
Add the cost of reimbursed fuel. Click link above for calculation worksheet.

Cents per Mile Method
Under this rule, multiply the personal use miles driven by your employee by the standard
business mileage rate issued by the IRS for the taxable year. For 2023, this would be (personal
miles * 0.585.)
To use the cents per mile method you must meet the following conditions:
1)Driven at least 10,000 miles per year
2)Used primarily by employees
3)Used regularly in your trade or business in the period that you own it
4)The vehicle must have a fair market value of less than $56,100
Once you have chosen either the Center per Mile or Lease Value Method, you must continue to
use that method in every subsequent year.
For both methods it is important to keep proper and timely documentation of your personal vs
business use. If you cannot determine business vs personal use, the IRS considers the value of
the vehicle 100% taxable to the employee for all use.
For more information, see Publication 15-B “Employer’s Tax Guide to Fringe Benefits” provided
here by the IRS.