Car allowance

[#1WATERFOWLER]

The company I work for is talking about giving me a car allowance. How do they work? Are they really a benefit to me or is it another way for the company to save money and shift burden to the employees rather than paying for rentals or providing a company car?

 

[Native NV Ducker]

Did you ask company?

As I understand it, you are getting a raise, but it has (is supposed) to be spent on a vehicle. It will count as income on your taxes. (I am not totally positive in this, but pretty sure)

If they just gave you a car, they would be responsible for fixing breakdowns, and maybe insurance. I had a take-home car for a few years working IAB. It was the Dept's car, not mine. If something broke, they fixed it. They also paid for the gas. Then again, it was basically only for 'official use', so not for going to the lake or grocery store. (Unless I was 'on call', in which case I was required to use it if I left the house, and going to the lake was out of the question anyway)

The upside is, you can pick any car/truck you want. The down side is, if the cost is above what they are giving you, that comes out of your pocket. But, again, the upper side is, it is YOUR car, not the companies. Win some, lose some.

 

[Holesinthesky]

Are they paying a flat/set rate per month
or
are they paying you a set amount for mileage?
- does it also include additional money for oil changes? ( some do- most don’t)

usually- most pay a set amount per mile, that you submit monthly mileage voucher.
( if you receive this money, and then claim the vehicle for business use on taxes, then it is taxable) ( this may of changed under new tax code).

with the mileage payment per mile. You are responsible for all maintenance costs.

PROs: you can basically get them to pay for your car.
CONs: your car will have ALOT of miles on it.

 

[QuaaackerJack]

Ours is $750/mo. Must be newer than 5 yrs old less than 150,000 miles. It's yours! You pay gas, you pay oil changes and maint.
It is a form of compensation to offset low(ish) salaries.
Nobody here complains about the company buying/paying for their new truck every 3-5 yrs.

 

[salthunter]

Depends on the options or types of allowance.
My daughter got a milage per job.
I ve received a simple daily stipend for gas a flat fee.
And mileage for driving between workplaces.

What is the exact offer. Some places can offer great opportunities, some almost pay for gas and some their payment can sink you

 

[Jamco6000]

The company I work for is talking about giving me a car allowance. How do they work? Are they really a benefit to me or is it another way for the company to save money and shift burden to the employees rather than paying for rentals or providing a company car?

How do they work?
Company pays you a set amount per year for you to provide your own vehicle, and pay for all expenses. This is considered taxable income.

Are they a benefit to me?
They can be.

Is it another way for the company to save money?
No.

Is this another way to shift burden to the employees rather than pay for rentals or providing a personal car?
It's more of a liability shift than a burden shift.

 

[#1WATERFOWLER]

Did you ask company?

As I understand it, you are getting a raise, but it has (is supposed) to be spent on a vehicle. It will count as income on your taxes. (I am not totally positive in this, but pretty sure)

If they just gave you a car, they would be responsible for fixing breakdowns, and maybe insurance. I had a take-home car for a few years working IAB. It was the Dept's car, not mine. If something broke, they fixed it. They also paid for the gas. Then again, it was basically only for 'official use', so not for going to the lake or grocery store. (Unless I was 'on call', in which case I was required to use it if I left the house, and going to the lake was out of the question anyway)

The upside is, you can pick any car/truck you want. The down side is, if the cost is above what they are giving you, that comes out of your pocket. But, again, the upper side is, it is YOUR car, not the companies. Win some, lose some.

No not yet. So far it’s just been talk. No formal plan / offer yet. I don’t even what questions to ask yet so your reply is helpful thanks.

 

[Timber Hole]

Since the allowance is taxable you can expense the business miles on the truck to offset a lot of that income.

 

[CA Birdman]

Timberhole's statement is incorrect for federal income tax purposes commencing with the 2017 tax act.

The problem is the current tax law passed in 2017 eliminated all the miscellaneous itemized deductions including unreimbursed auto expense. So if you have an accountable plan where reimbursed for actual expenses, then not on W2 and not income.

If have a non-accountable plan - get flat $750 month then it is taxable compensation and you get no deduction for the car expenses on your federal tax return based on laws in existence through 2025, some states you may, but it depends on state law.

 

[HNTFSH]

Timberhole's statement is incorrect for federal income tax purposes commencing with the 2017 tax act.

The problem is the current tax law passed in 2017 eliminated all the miscellaneous itemized deductions including unreimbursed auto expense. So if you have an accountable plan where reimbursed for actual expenses, then not on W2 and not income.

If have a non-accountable plan - get flat $750 month then it is taxable compensation and you get no deduction for the car expenses on your federal tax return based on laws in existence through 2025, some states you may, but it depends on state law.

Yeah...I've had or seen about every type of "plan" out there over the years and the only one that didn't "cost" me personally (or erode NET income) to drive for business was rental car+gas expenses paid.

Be leery, no company in these economic conditions are being "nicer" and costing themselves "more" to help "you" out I'm afraid.

Any car allowance is taxable income. I find it impossible anymore to beat the standard deduction on Federal taxes by itemizing deductions.