Corporate Commuting Car

Today TaxMama hears from George in Brooklyn, NY who asks. “If a corporation gives an individual a car to use for commuting purposes, what amount gets reported on the individual tax return and how does the corporation report it on their side? Is the income subject to Social Security taxes for the employee?”

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Dear George,

Commuting is never a deductible expense.

So, according to IRS’s Publication 15-B, which explains employee benefits, if the purpose of the car is commuting, 100% of the fair market lease or rental value of the vehicle is taxable to the employee as part of their wages. Which means it’s subject to all the Social Security and other taxes.

http://www.irs.gov/publications/p15b/ar02.html#d0e2419

On the other hand, if an employer provides a qualified transportation benefit, that would be fully deductible to the employer as an employee benefit expense, and not taxable to the employee.

This exclusion applies to the following benefits.
·A ride in a commuter highway vehicle between the employee’s home and work place.

(This seats six people plus the driver)
·A transit pass.
·Qualified parking.
You can read more about the qualifications for that here:
http://www.irs.gov/publications/p15b/ar02.html#d0e2018

Sorry to be the bearer of bad news.

Perhaps you can have the company buy a 7 passenger van and arrange to have you pick up other employees on your way to work?

And remember, you’ll find answers to lots of questions about employee benefits and other tax information, free. Where? At TaxMama.com

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