Defining the Personal Use of your vehicle

Understanding personal use or personal mileage of a company vehicle is super important. It affects your taxes and how your employer handles things. This guide breaks down what it is and why you need to know.

What is Personal Use (Personal Mileage)?

Personal mileage is just what it sounds like: miles you drive in a company car for reasons that aren’t business-related. This includes driving to and from work, running errands, or taking trips with your family. It’s basically any driving that isn’t directly for your job duties. On the flip side, business mileage is only travel between different work locations and specifically excludes your daily drive to your regular office.

The IRS sees your personal use of a company car as extra money you get (a taxable fringe benefit). This means you might owe taxes on it. Because of this, it’s crucial to know where to draw the line between driving for work and driving for life.

Key Facts and Numbers About Personal Use

The IRS has rules about how to figure out the value of your personal use of a company vehicle. The most common ways are pretty straightforward:

• Annual Lease Value Method: This method looks at the car’s total value when you first got it. It figures out a yearly (or monthly) cost based on that value. Then, you pay tax on a portion of that cost based on how much of your driving was personal use. This method includes costs like maintenance and insurance, but not the fuel you pay for yourself.
• Cents-Per-Mile Method: This is often easier. The IRS sets a standard rate for each mile. You multiply your personal mileage by this rate to get the taxable value. For example, if you drove 200 personal miles and the rate is 54 cents a mile, the value is $108 (200 miles * $0.54). If your employer doesn’t pay for your fuel, the rate might be a bit lower.

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