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Company Cars & Fringe Benefits Tax in Wisconsin & Illinois

Tax Implications of a Company Car

Company Car Allowance Tax

Providing employees with company cars is considered a fringe benefit, and must be taxed accordingly. Leasing a fleet of company vehicles provides businesses and employees with different tax benefits. Following IRS guidelines on company cars will ensure businesses and employees receive appropriate tax incentives. Contact Ewald to learn more.

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Fleet incentives like lower taxes and rebates are one of the many reasons businesses prefer leasing company cars vs buying. Providing employees with a fringe benefit like a company car offers lower tax costs compared to reimbursing for mileage. The larger your fleet, the greater the benefits. While you should consult your company's tax team to determine the exact benefits, virtually every business that chooses fleet leasing with Ewald over buying saves money in tax expense.

The value of the fringe benefit, in this case use of a company car, must be withheld from the employee’s paycheck and is based on the Fair Market Value (FMV) of the benefit. There are 3 ways to determine the FMV of a leased company car:

 

1. Company Car Cents per Mile RuleCompany Car Cents per Mile Rule 2019

Businesses can exclude 58 cents per business mile driven in 2019. A business can use the cents-per-mile rule to calculate fringe benefits of their company car if the vehicle is driven at least 10,000 miles per year, the company car is used primarily by employees, and at least 50% of the mileage is business related. Seek advice from your tax team for more information. 

PeriodRates in cents per mileSource
BusinessCharityMedical Moving
2019
  • 58
  • 14
  • 20
IR-2018-251
2018
  • 54.5
  • 14
  • 18
IR-2017-204
2017
  • 53.5
  • 14
  • 17
IR-2016-169
2016
  • 54
  • 14
  • 19
IR-2015-137

2. Company Car Commuting Rule

The commuting rule only applies if the sole personal use of the company car is commuting to and from work. For instance, if a contracting company is leasing company trucks and the only personal use is when the employee drives to or from a job site the business can use the commuting rule. According to the IRS, the value of a single one-way commute is $1.50. Many businesses, especially contracting companies, prefer this method because it does not require anyone to track mileage. Businesses can only use this if there is a written policy that the vehicle is not for personal use, and (in actuality) the vehicle is not used for personal purposes.

3. Company Car Lease Value Rule

The lease value rule lets businesses determine the value of a company vehicle by using the annual lease value. Employees must reduce the value of their company vehicle by the amount excluded from employee wages as a working condition benefit, meaning the employee must report mileage. Many businesses use pen and paper to track mileage. Ewald offers easy, digital fleet mileage management for faster, more accurate reporting. Businesses who use the lease value rule for their company cars must begin using this rule as soon the vehicle is available to employees and must continue to use it for the life of the vehicle. This is a popular option for businesses with executive fleet leasing.

Benefits of Leasing a Company Car

Leasing a company car is ideal for businesses looking to save money through low cost of ownership and tax incentives. Taking full advantage of all the benefits of leasing a company car requires detailed knowledge of how to properly file. Ewald Fleet Solutions is here to help your business save money by leasing your fleet of company cars.

 

 

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