Is a car allowance taxable to an employee?
Quick Answer
According to CarsDirect, mileage reimbursement up to the federal mileage reimbursement rate is not taxable, but a standard car allowance is considered to be taxable income. If an employee is not reimbursed for mileage, he or she is allowed to list that amount as a deduction on his or her annual tax return.
Continue ReadingFull Answer
If an employee does not drive a company vehicle, he or she may be eligible to be reimbursed for wear and tear on his or her car. When a company offers a car allowance, it is usually in one of two ways.
- Standard allowance
- Mileage reimbursement
CarsDirect states that a standard car allowance is a set amount given to an employee each pay period by the employer. This amount is meant to be used to cover car expenses and is in lieu of the company furnishing the employee with a company vehicle. This type of car allowance is usually considered to be taxable income, and the employee will have to declare it on his or her income tax return and pay taxes on it.
Instead of a set car allowance, come companies choose to reimburse the employee for the actual miles driven. As of 2015, the federal mileage reimbursement rate is 57.5 cents per mile for business, 23 cents per mile for medical or moving purposes and 14 cents per mile while driving for charitable organizations, as stated on the IRS website. This amount is not considered to be taxable income.
Related Questions
-
Q:
How much is the family allowance in the UK?
A: The current family allowance, or Child Benefit rate, in the United Kingdom is ��20.50 per week for the first child and ��13.55 per week for each additional... Full Answer >Filed Under: -
Q:
What are common car allowance policies?
A: Common car allowance policies allow for either fuel or mileage reimbursement, discount or subsidy. Many policies include parking passes or reimbursement fo... Full Answer >Filed Under: -
Q:
What is the Social Security tax withholding rate?
A: The employee Social Security tax withholding rate is 7.65 percent as of 2015, according to the Social Security Administration. That number is matched with ... Full Answer >Filed Under: -
Q:
How do you calculate the social security tax percentage?
A: To calculate the social security tax percentage as of 2015, add the 6.2 percent rate for the employer and the 6.2 percent rate for the employee, which tota... Full Answer >Filed Under:
