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Employer Provided Vehicle Tax


Personal Use of Company-Provided Vehicle Example Calculation Using Annual Lease Value Method

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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FYI...  All our calculators are able to address Supplemental withholding rates. Note that Supplemental is an option in the Federal Filing Status field.