Currently I have a lease vehicle my company "pays" for (I pay $120 per month for personal use), which is about to expire. We now have the option for a $500 per month vehicle allowance, which barely covers a monthly payment for a vehicle, especially adding insurance etc. Am I allowed to write off/depreciate any of my vehicle payment amount, oil changes, maintenance etc. or use the IRS mileage when filing taxes... or nothing since I get the allowance? I work in sales and use my vehicle 99% of the time for work.

Also, if I go this route do I need to hire a CPA or pay someone to help itemize or is there a standard form for this when filing.

Really appreciate the help.

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We now have the option for a $500 per month vehicle allowance, which barely covers a monthly payment for a vehicle, especially adding insurance etc.

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Is that the only option? $500 allowance or nothing? Can you get just a mileage reimbursement? Seems to me they are screwing you if you really drive a lot for work.

If you really are in the car a lot, pretty much anything more than 35-40 miles a work day on average I think you would be better off if they were reimbursing your mileage. Maybe even less miles per day once taxes are figured in since the $500 allowance is taxable and a standard mileage reimbursement is not.

jpd301 said:

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We now have the option for a $500 per month vehicle allowance, which barely covers a monthly payment for a vehicle, especially adding insurance etc.

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Is that the only option? $500 allowance or nothing? Can you get just a mileage reimbursement? Seems to me they are screwing you if you really drive a lot for work.

If you really are in the car a lot, pretty much anything more than 35-40 miles a work day on average I think you would be better off if they were reimbursing your mileage. Maybe even less miles per day once taxes are figured in since the $500 allowance is taxable and a standard mileage reimbursement is not.

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We used to do mileage, but only 47 cents per mile so we all went to company cars(sold my truck). Now the option is on the table to get $500 a month I am weighing the options, but man that doesn't get much if anything of a car. With two kids and all my work stuff I am out of room...curious if my payment is say $7-$800 a month can I do mileage and subtract the $500 monthly and write off the rest? Or, am I just out of luck and have to eat the overage?

Can't you write off your business miles at ~ 57 cents/mile?

barnyard1996 said:

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Can't you write off your business miles at ~ 57 cents/mile?

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My company only pays 47 cents, I believe you can write off the other 10 cents but wasn't sure so I took the easiest route of the company car. Now two kids later I am out of room.

So do they not offer mileage reimbursement at all anymore, even at the substandard amount?

I am not an accountant but with the tax law changes a couple years ago I know all of my un-reimbused employee expenses for work were no longer deductible.

How many work miles, not counting your commute, do you put on the vehicle a month? Even mileage at on $0.47/mi may still put you ahead of the $500 monthly allowance if you are actually driving a lot.

jpd301 said:

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So do they not offer mileage reimbursement at all anymore, even at the substandard amount?

I am not an accountant but with the tax law changes a couple years ago I know all of my un-reimbused employee expenses for work were no longer deductible.

How many work miles, not counting your commute, do you put on the vehicle a month? Even mileage at on $0.47/mi may still put you ahead of the $500 monthly allowance if you are actually driving a lot.

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I cover all of Texas, and the coast of Louisiana outside sales so an average year I'm driving 20k miles. Easily. Our company doesn't do the mileage anymore, so the only options are the $500 a month plus gas card, or the little sedan for $120 a month all expenses paid.

Can you take the little sedan and forego "personal use" of it? Use the extra $120/m to buy momma a bigger vehicle or rent something for the weekend when you really "need" it?

$500/m will finance $28k for 60. $400/m will be $22.5k leaving $100/m for insurance but nothing for gas, tires, oil changes. I'd think you'd need to be in the $350/m range on the payment to make it make sense - $19.7kish.

It's been a minute since I car shopped, so no clue what that buys.

mosdefn14 said:

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Can you take the little sedan and forego "personal use" of it? Use the extra $120/m to buy momma a bigger vehicle or rent something for the weekend when you really "need" it?

$500/m will finance $28k for 60. $400/m will be $22.5k leaving $100/m for insurance but nothing for gas, tires, oil changes. I'd think you'd need to be in the $350/m range on the payment to make it make sense - $19.7kish.

It's been a minute since I car shopped, so no clue what that buys.

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Her mid sized SUV is paid off, and she really likes her car. Plus she works downtown and parking in her garage is really tight quarters. The issue is now she is back in the office, I am taking kids to and from daycare everyday, along with all of my work cases etc and now out of room. Even if I wait til the inventory rises at car lots pricing out a truck or suv is outrageous.

Not wanting to get too far off subject, I am just just curious if I can somehow write off the overage of the vehicle if it does go over $500 per month? Appreciate all the help

Gotcha. If you're W2, most likely not under new tax law, but I cannot give tax advice.

You're screwed. It sounds like you now have an unaccountable plan that is just an additional $500 of taxable income for you every month. Can't write anything off if you're an employee. I have a ton of clients that don't realize until I explain it to them that they are putting their employees in a worse position with their new vehicle allowance plan changes, so you're not alone getting hosed.

OldArmyBrent said:

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You're screwed. It sounds like you now have an unaccountable plan that is just an additional $500 of taxable income for you every month. Can't write anything off if you're an employee. I have a ton of clients that don't realize until I explain it to them that they are putting their employees in a worse position with their new vehicle allowance plan changes, so you're not alone getting hosed.

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Well this sucks...really appreciate the help. Gonna talk to them next week to see if we can work something out. Thanks everyone.

aggiebrother33 said:

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OldArmyBrent said:

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You're screwed. It sounds like you now have an unaccountable plan that is just an additional $500 of taxable income for you every month. Can't write anything off if you're an employee. I have a ton of clients that don't realize until I explain it to them that they are putting their employees in a worse position with their new vehicle allowance plan changes, so you're not alone getting hosed.

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Well this sucks...really appreciate the help. Gonna talk to them next week to see if we can work something out. Thanks everyone.

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Buy a used Honda and drive it till it dies.

Good luck. That's how I usually get asked the question. "Hey OAB, one of our employees said they can't deduct it and it's just going to be additional income. Is that true?" Sometimes they fix it.

Yeah they just basically cut your pay, I'd be asking for something to offset that amount of I was highly valued enough. Never take a pay cut unless you own a piece of the company

Keeper of The Spirits said:

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Yeah they just basically cut your pay, I'd be asking for something to offset that amount of I was highly valued enough. Never take a pay cut unless you own a piece of the company

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This.

I drive a company truck about 40k miles a year. We report a estimated percentage of miles that are personal. If they took it away and offered me what you are getting I would expect a large pay raise or be shopping for the next job (taking the sedan benefit in the mean time).

Luckily in Ag it's essential to offer the vehicle as a perk to remain competitive in hiring employees. I haven't owned a vehicle in 10 years because of this, but I've been through 6 trucks during that time.

bmks270 said:

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You can get a car for $500/month, but insurance will probably put you over.

You can get a used car under 20k and probably be near $500/month with payment (60 months) and insurance.

Do they reimburse gas?

I think 500/month is pretty generous.

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Depending on the situation, it's really not. I was in a sales position, driving to Midland from Houston at least once a month, usually twice. It was pretty normal for me to drive 3,000 just for work in a month, 5,000 wasn't uncommon.

My company required me to have a truck to be able to deliver parts and one that was newer than 3 years old.

Take taxes out of your $500, you're at $350 or so. That doesn't cover a car payment. I didn't think it was a big deal at the time as I was going to have the truck anyway. But I also didn't think I would be putting on the miles I was. Add in an oil change every other month, tires roughly yearly, depreciation on said truck and being forced to upgrade every 3 years.....I was way, way in the hole in that situation

htxag09 said:

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bmks270 said:

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You can get a car for $500/month, but insurance will probably put you over.

You can get a used car under 20k and probably be near $500/month with payment (60 months) and insurance.

Do they reimburse gas?

I think 500/month is pretty generous.

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Depending on the situation, it's really not. I was in a sales position, driving to Midland from Houston at least once a month, usually twice. It was pretty normal for me to drive 3,000 just for work in a month, 5,000 wasn't uncommon.

My company required me to have a truck to be able to deliver parts and one that was newer than 3 years old.

Take taxes out of your $500, you're at $350 or so. That doesn't cover a car payment. I didn't think it was a big deal at the time as I was going to have the truck anyway. But I also didn't think I would be putting on the miles I was. Add in an oil change every other month, tires roughly yearly, depreciation on said truck and being forced to upgrade every 3 years.....I was way, way in the hole in that situation

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OP hasn't indicated such requirements.

htxag09 said:

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bmks270 said:

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You can get a car for $500/month, but insurance will probably put you over.

You can get a used car under 20k and probably be near $500/month with payment (60 months) and insurance.

Do they reimburse gas?

I think 500/month is pretty generous.

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Depending on the situation, it's really not. I was in a sales position, driving to Midland from Houston at least once a month, usually twice. It was pretty normal for me to drive 3,000 just for work in a month, 5,000 wasn't uncommon.

My company required me to have a truck to be able to deliver parts and one that was newer than 3 years old.

Take taxes out of your $500, you're at $350 or so. That doesn't cover a car payment. I didn't think it was a big deal at the time as I was going to have the truck anyway. But I also didn't think I would be putting on the miles I was. Add in an oil change every other month, tires roughly yearly, depreciation on said truck and being forced to upgrade every 3 years.....I was way, way in the hole in that situation

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This is my worry, I even weighed the thought of a diesel since you can drive those for 300-400k miles without batting an eye but cannot justify the cost to buy. I did find out the $500 will be on my expense check, so not taxed income which is a benefit. Just need to find a truck or larger SUV for a reasonable price that will last.

OldArmyBrent said:

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I obviously don't have all the facts, but this seems suspicious. There's a risk, albeit small, that they're doing that wrong. If the IRS looks at it and decides that is actually taxable to employees, you'll be forced to report the income - add interest and penalties if the returns have already been filed.

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When we got paid mileage it was on our expense check, I'm guessing since we were paying tax on the gas etc. For the $500 allowance I assume since we are paying tax on oil changes, tires, vehicle payment etc. that's the same expense. I'm leaning toward getting what I want and just eating the extra, especially since my wife's car is paid off. Looking at it as a discounted car payment for the family...

The mileage was still an accountable plan. You provided mileage, they provided a payment. It's not taxable. The new plan is a payment of a set amount and you get to decide how to use it without having to provide receipts, correct?

Yes, if it's called a car allowance it has to be taxable. That's the plan I'm on. I get $500/month that's taxed. Luckily I also get to use company CC for fuel.

Yep... if it is a fixed amount allowance, the company gets to write it off but you can't. It will be taxed. Agree with Keeper that you should have a conversation about a pay increase to offset the difference in compensation. The company car was part of your compensation package and now that its been reduced, you either need to be made whole or should start looking for a new gig.

Keeper of The Spirits said:

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Yeah they just basically cut your pay, I'd be asking for something to offset that amount of I was highly valued enough. Never take a pay cut unless you own a piece of the company

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When you say "never take a pay cut " - I'm assuming you mean you should be looking for another job? Don't think it'd go over very well if you just said "no I'm not accepting that".

I'd be taking the sedan? What sedan options are available?

Get a luggage rack to haul around your stuff. Make it embarrassing that your company is so cheap.