employee use of a company car
If an S corporation leases a vehicle for use
by a shareholder, can the monthly expenses be deducted if the vehicle
is driven to a fixed place of business (office)? I understand that
you can't deduct the cost of commuting to your regular place of
work. Thank you. -- Nasser
Generally, an S corporation can deduct as a business expense the
cost of a vehicle provided to an employee. The employee is taxed
on the value of the vehicle provided, multiplied by the personal-use
percentage. The value is considered additional wages to the employee
on which income, but not FICA, taxes are due.
If the employee only uses the vehicle to commute from
home to work, 100 percent of the value is includible in his wages.
The table on page 20 of Internal
Revenue Service Publication 15B, Employer's Tax Guide to
Fringe Benefits, shows the amount to be included in the
employee's W-2. The annual lease value table includes the amount
paid for insurance and maintenance, but not fuel. Fuel is valued
at 5.5 cents a mile or actual reimbursements and is includible in
the employee's W-2 also.
If the employee uses the vehicle for work purposes
such as visiting clients, the amount included in the W-2 is reduced
by the business use of the vehicle. The employee needs to report
to the employer the amount of business use of the car so that the
inclusion can be reduced accordingly.
Alternatively, if 100 percent of the value is
included in the W-2, the employee can claim a deduction for the
business use of the vehicle on his or her individual return.