Employer Provided Vehicle Tax

by Robert W. Ditmer, CPP*

Assumptions:

• Vehicle purchase price: $12,500
• Total mileage vehicle driven between 11/1/02 to 10/31/03*: 18,500
• Total personal usage from mileage logs: 4,800
• All gasoline purchased with company credit card
• Value to be taxed at supplemental wage tax rate (25%)

Calculation of Employee Cost:

• Determine annual lease value from Table. ($3,600)
• Calculate percentage of personal use. (4,800 / 18,500 = 26%)
• Calculate value of personal use. ($3,600 x 26% = $936.00)
• Calculate gasoline cost at 5.5 cents per mile. (4,800 x .055 = $264.00)
• Calculate total value of personal use. ($936.00 + $264.00 = $1,200.00)

Calculation of Taxes:

• Federal income tax. ($1,200.00 x 25% = $300.00)
• Social security tax. ($1, 200.00 x 6.2% = $74.40)
• Medicare tax. ($1, 200.00 x 1.45% = $17.40

Reporting of Fringe Benefit(if taxes withheld from employee’s paycheck):

• Add $1, 200.00 to totals in Boxes 1, 3 and 5 of W-2.
• Add $300.00 to total in Box 2 of W-2.
• Add $74.40 to total in Box 4 of W-2.
• Add $17.40 to total in Box 6 of W-2.
• Add $1,200.00 to total on Line 1 of Part I of Form 940.

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