Slightly OT: Company cars in the US, taxed or not?

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The Spanish Inquisition - 03 May 2006 13:42 GMT

In my home country there's a special tax rule for company cars. If you
use a company car privately you have to add 22% of the catalog price
(when it was new) to your income. This 22% is taxed according to your
tax bracket (43% - 52%). This is based on the idea that having the
private use of a company car is a kind of income.

I understand that there's a similar system in the UK.

What's the situation in the US? I've googled around a bit but I couldn't
find anything.

Ximinez

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Our three weapons are fear, surprise, and ruthless efficiency...
and an almost fanatical devotion to the Pope....
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trader4@optonline.net - 03 May 2006 14:03 GMT

> In my home country there's a special tax rule for company cars. If you
> use a company car privately you have to add 22% of the catalog price
[quoted text clipped - 12 lines]
> and an almost fanatical devotion to the Pope....
> http://www.ai.mit.edu/people/paulfitz/spanish/t1.html

In the US, if you get a company car that is only used for company
business, it is not taxable at all. An example of this would be a
company vehicle that you leave at the employers location and do not
drive home.

If you have personal use of a company car, then the portion of the
vehicles cost attributable to personal use is treated as ordinary
income and is taxable. Personal use includes driving it to and from
work. As an example, if the company leased a car and the yearly cost
is $4000 and you used it 20% for personal use, then you would pay
federal income tax on $800. If it is partly used for personal use,
you are also required to keep a log showing dates, miles driven, start
point, end point, etc to document the amount of personal usage.

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The Spanish Inquisition - 03 May 2006 15:16 GMT

>> In my home country there's a special tax rule for company cars. If you
>> use a company car privately you have to add 22% of the catalog price
[quoted text clipped - 11 lines]
> company vehicle that you leave at the employers location and do not
> drive home.

That's the same here. No private use, no tax.

> If you have personal use of a company car, then the portion of the
> vehicles cost attributable to personal use is treated as ordinary
[quoted text clipped - 4 lines]
> you are also required to keep a log showing dates, miles driven, start
> point, end point, etc to document the amount of personal usage.

OK, so the real cost (or a close estimation) are added to your income.
That's a lot more reasonable (although I hate keeping logs) than using
22% of the catalog price. This is especially unpleasant in the cas eof
an older car, since even for a 10 year old car you once bought for
25.000, you'd still be paying 43 to 52% over 5.500 yearly which adds up
(keep in mind that road tax and gas taxes are high as well).

When the car is older than 15 years, the 22% is calculated over the
*current market value* of the car. So now you understand why I'm driving
an old MB. I could get used to it, though ;)

Thanks for the info.

Ximinez

Signature

Our three weapons are fear, surprise, and ruthless efficiency...
and an almost fanatical devotion to the Pope....
http://www.ai.mit.edu/people/paulfitz/spanish/t1.html

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jdoe - 03 May 2006 17:11 GMT

>In my home country there's a special tax rule for company cars. If you
>use a company car privately you have to add 22% of the catalog price
[quoted text clipped - 6 lines]
>What's the situation in the US? I've googled around a bit but I couldn't
>find anything.

US tax code is very complex so any advice you get here may not fit all
situations,

one scenario that is fairly straightforward is if the car is used
100% for business and does not go home at night it isn't taxed to the
user but to the company that owns it and with ownership there are many
deductions that can lower any taxes that are applied, such as
depreciation and maintenance.

If the car is issued and can be used for both business and non
business uses there can be a tax laibility, taxes vary depending on
vehicle usage and unless a specific situation is cited it is difficult
to answer.

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trader4@optonline.net - 03 May 2006 18:51 GMT

> >In my home country there's a special tax rule for company cars. If you
> >use a company car privately you have to add 22% of the catalog price
[quoted text clipped - 15 lines]
> deductions that can lower any taxes that are applied, such as
> depreciation and maintenance.

A car, like any other item isn't taxable to the business, except for
sales tax. It's an expense to the business, not income.

> If the car is issued and can be used for both business and non
> business uses there can be a tax laibility, taxes vary depending on
> vehicle usage and unless a specific situation is cited it is difficult
> to answer.

It's easy to answer. The amount attributable to personal use is
regarded as income to the individual.

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