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

same or a similar vehicle on the same or comparable terms

occasional trips to the airport or between your multi-

in the geographic area where the employee uses the

ple business premises, is not regular use of the vehi-

vehicle. A comparable lease term would be the amount of

cle in your trade or business.

time the vehicle is available for the employee’s use, such

as a 1-year period.

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

Do not determine the fair market value by multiplying a

dar year if both of the following requirements are met.

cents-per-mile rate times the number of miles driven un-

less the employee can prove the vehicle could have been

1) The vehicle is actually driven at least 10,000 miles

leased on a cents-per-mile basis. See Cents-Per-Mile

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

Rule, next.

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

proportionately.

Cents-Per-Mile Rule

2) The vehicle is used during the year primarily by em-

ployees. Consider the vehicle used primarily by em-

ployees if they use it consistently for commuting. Do

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

not treat use of the vehicle by another individual

provide to an employee for personal use by multiplying the

whose use would be taxed to the employee as use

standard mileage rate by the total miles the employee

by the employee.

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

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

during the calendar year and that employee drives the

wages or reimbursed by the employee. For 2002, the

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

standard mileage rate is 36.5 cents a mile.

the mileage test even if all miles driven by the employee

are personal.

Maximum automobile value. You cannot use

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

C onsistency

re quireme nts. If

you

use

the

4-wheeled vehicle, such as a car, pickup, or van)

CAUTION

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

if its value when you first make it available to any employee

for personal use is more than an amount determined by the

1) You must begin using this rule the first day you make

IRS as the maximum automobile value for the year. For

the vehicle available to any employee for personal

example, you cannot use the cents-per-mile rule for an

use. However, if you use the commuting rule when

automobile you first made available to an employee in

you first make the vehicle available to any employee

2001 if its value at that time was more than $15,400. The

for personal use, you can change to the

maximum automobile value for 2002 will be published in a

cents-per-mile rule on the first day for which you do

revenue procedure in the Internal Revenue Bulletin early in

not use the commuting rule.

2002. If you and the employee own or lease the automobile

together, see section 1.61-21(e)(1)(iii) of the regulations.

2) You must use this rule for all later years in which you

make the vehicle available to any employee and the

vehicle qualifies, except that you can use the com-

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

muting rule for any year during which use of the

following requirements is met.

vehicle qualifies. However, if the vehicle does not

qualify for the cents-per-mile rule during a later year,

1) You reasonably expect the vehicle to be regularly

you can use for that year and thereafter any other

used in your trade or business throughout the calen-

rule for which the vehicle then qualifies.

dar year (or for a shorter period during which you

own or lease it).

3) You must continue to use this rule if you provide a

replacement vehicle to the employee and your pri-

2) The vehicle meets the mileage test.

mary reason for the replacement is to reduce federal

taxes.

Vehicle. For this rule, a vehicle is any motorized wheeled

vehicle, including an automobile, manufactured primarily

for use on public streets, roads, and highways.

Items included in cents-per-mile rate. The

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

Regular use in your business. A vehicle is regularly

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

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

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

following conditions is met.

provide. (You can take into account the services actually

provided for the vehicle by using the general valuation rule

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

discussed earlier.)

for your trade or business.

For miles driven in the United States, its territories and

2) You sponsor a commuting pool that generally uses

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

the vehicle each workday to drive at least 3 employ-

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

ees to and from work.

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

3) The vehicle is regularly used in your trade or busi-

For special rules that apply to fuel you provide for miles

driven outside the United States, Canada, and Mexico, see

ness on the basis of all the facts and circumstances.

section 1.61-21(e)(3)(ii)(B) of the regulations.

Infrequent business use of the vehicle, such as for

Page 18

Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 18

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