Business use of a personal car, good or bad?
In the past I have always had a company car. Recently I was
given the option of continuing with a company car or being
reimbursed on my personal car. I think I would be either
given a flat monthly car allowance or receive .375 for each
mile driven. The car allowance would be treated as a fringe
benefit, which I think would cause me some tax headaches. I
like the idea of buying my own car, however, I'm not sure of
what type of tax problems might arise.
My questions are as follows:
1) Would it be a mistake to move from a company car to using
my personal car?
2) If I receive .375 per mile for mileage, would there be
any tax consequences? Is it treated as a reimbursement?
Would I have to file any special tax forms?
3) I see nothing but problems with a car allowance. Would it
be trated as income? If so, do I then have to get into
depreciation?
Are there any tax consequences of your current arrangement?
Doe any income show up on your W-2 for this car? Do you
have any personal use? If the current car is tax free, I
would stick with it.
> 2) If I receive .375 per mile for mileage, would there be
> any tax consequences? Is it treated as a reimbursement?
> Would I have to file any special tax forms?
If you record your mileage and report it to your company and
they pay you for it, there are no tax consequences or
reporting requirements. This is your second best option.
> 3) I see nothing but problems with a car allowance. Would it
> be trated as income? If so, do I then have to get into
> depreciation?
This would be the most administratively complex of the lot.
It is an employee business expense subject to the 2% of AGI
limitation. Generally a bad deal.
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