Publication 15-B Employer'S Tax Guide To Fringe Benefits

•

The vehicle is used during the year primarily by

Cents-Per-Mile Rule

employees. Consider the vehicle used primarily by

employees if they use it consistently for commuting.

Under this rule, you determine the value of a vehicle that

Do not treat the use of the vehicle by another individ-

you provide to an employee for personal use by multiplying

ual whose use would be taxed to the employee as

the standard mileage rate by the total miles that the em-

use by the employee.

ployee drives the vehicle for personal purposes. Personal

use is any use of the vehicle other than use in your trade or

For example, if only one employee uses a vehicle during

business. This amount must be included in the employee’s

the calendar year and that employee drives the vehicle at

wages or reimbursed by the employee. For 2003, the

least 10,000 miles in that year, the vehicle meets the

standard mileage rate is reduced to 36 cents a mile.

mileage test even if all miles driven by the employee are

You can use the cents-per-mile rule if either of the

personal.

following requirements is met.

•

You reasonably expect the vehicle to be regularly

C onsistency

re quireme nts. If

you

use

the

used in your trade or business throughout the calen-

cents-per-mile rule, the following requirements apply:

dar year (or for a shorter period during which you

•

You must begin using the cents-per-mile rule on the

own or lease it).

first day that you make the vehicle available to any

•

The vehicle meets the mileage test.

employee for personal use. However, if you use the

commuting rule below when you first make the vehi-

cle available to any employee for personal use, you

Maximum automobile value. You cannot use

can change to the cents-per-mile rule on the first day

the cents-per-mile rule for an automobile (any

for which you do not use the commuting rule.

4-wheeled vehicle, such as a car, pickup truck, or

CAUTION

•

van) if its value when you first make it available to any

You must use the cents-per-mile rule for all later

employee for personal use is more than an amount deter-

years in which you make the vehicle available to any

mined by the IRS as the maximum automobile value for the

employee and the vehicle qualifies, except that you

year. For example, you cannot use the cents-per-mile rule

can use the commuting rule for any year during

for an automobile that you first made available to an em-

which use of the vehicle qualifies. However, if the

ployee in 2002 if its value at that time was more than

vehicle does not qualify for the cents-per-mile rule

$15,300. The maximum automobile value for 2003 will be

during a later year, you can use for that year and

published in a revenue procedure in the Internal Revenue

thereafter any other rule for which the vehicle then

Bulletin early in 2003. If you and the employee own or

qualifies.

lease the automobile together, see Regulations section

•

You must continue to use the cents-per-mile rule if

1.61-21(e)(1)(iii)(B).

you provide a replacement vehicle to the employee

and your primary reason for the replacement is to

reduce Federal taxes.

Vehicle. For the cents-per-mile rule, a vehicle is any mo-

torized wheeled vehicle, including an automobile, manu-

Items included in cents-per-mile rate. The

factured primarily for use on public streets, roads, and

cents-per-mile rate includes the value of maintenance and

highways.

insurance for the vehicle. Do not reduce the rate by the

Regular use in your trade or business. A vehicle is

value of any service included in the rate that you did not

regularly used in your trade or business if at least one of

provide. (You can take into account the services actually

the following conditions is met.

provided for the vehicle by using the General Valuation

Rule on page 17.)

•

At least 50% of the vehicle’s total annual mileage is

For miles driven in the United States, its territories and

for your trade or business.

possessions, Canada, and Mexico, the cents-per-mile rate

•

You sponsor a commuting pool that generally uses

includes the value of fuel that you provide. If you do not

the vehicle each workday to drive at least 3 employ-

provide fuel, you can reduce the rate by no more than 5.5

ees to and from work.

cents.

•

For special rules that apply to fuel that you provide for

The vehicle is regularly used in your trade or busi-

miles driven outside the United States, Canada, and Mex-

ness on the basis of all of the facts and circum-

ico, see Regulations section 1.61-21(e)(3)(ii)(B).

stances. Infrequent business use of the vehicle,

The value of any other service that you provide for a

such as for occasional trips to the airport or between

vehicle is not included in the cents-per-mile rate. Use the

your multiple business premises, is not regular use

general valuation rule to value these services.

of the vehicle in your trade or business.

Commuting Rule

Mileage test. A vehicle meets the mileage test for a calen-

dar year if both of the following requirements are met.

Under this rule, you determine the value of a vehicle that

•

The vehicle is actually driven at least 10,000 miles

you provide to an employee for commuting use by multiply-

during the year. If you own or lease the vehicle only

ing each one-way commute (that is, from home to work or

from work to home) by $1.50. If more than one employee

part of the year, reduce the 10,000 mile requirement

proportionately.

commutes in the vehicle, this value applies to each em-

Page 18

Publication 15-B Employer'S Tax Guide To Fringe Benefits - 2003 Page 18

Related Articles

Related forms

Related Categories