Do you or your employees use union vehicles for reasons other than work? If yes, you need to be aware of the taxation rules for the personal use of company cars.

What is “personal use of a company vehicle/car”?

Personal use of a company car (PUCC) encompasses any use of a company-owned or company-leased vehicle for purposes not business-related. Examples of personal use include commuting to and from work, use on weekends or during time off, running personal errands, and use by someone other than an employee (i.e., an employee’s spouse or relative).

How do you record personal usage?

It’s important for employees to track both their business and personal use of company vehicles. Without proof that the vehicle was used for business purposes, all use of a company vehicle will be considered personal use by the IRS. Employees should keep detailed records of all business and personal use of the vehicle, including miles traveled, locations, dates, times, and the purpose of the travel.

Is personal use of a company vehicle taxed?

Yes. Personal use of a company car is considered a fringe benefit, meaning it is a form of non-cash compensation provided in addition to a person’s salary. As a fringe benefit, this value is included in the employee’s income and taxed accordingly.

How is the personal use of a company vehicle measured?

There are several methods of measuring personal use of a company car. The rules for calculating the value of fringe benefits are explained in IRS Publication 15-B.

1. General Valuation Method: This is the most common method for measuring the value of fringe benefits. Under this method, the value of the fringe benefit is equal to the Fair Market Value of the vehicle. The Fair Market Value (FMV) is the amount an employee would need to pay a third party to buy or lease the vehicle under the current market conditions in a given geographic location.
2. Cents-Per-Mile Method: The cents-per-mile rule uses the standard mileage reimbursement rate multiplied by an employee’s personal mileage to determine the value of PUCC. The standard mileage reimbursement rate for 2025 is 70 cents per mile. This method can be used if the vehicle is regularly used for business purposes or if the vehicle meets the mileage test (the vehicle is driven at least 10,000 miles during the year, primarily by employees).
3. Commuting-Valuation Method: This method can be used when employees are required to commute to work using a company vehicle and the personal use of the vehicle is limited to commuting and de minimis personal use (i.e., stopping for an errand on the way to or from work). The value of the PUCC is determined by multiplying each one-way commute by $1.50.
4. Lease Value Method: This method determines the PUCC value by multiplying the annual lease value of the vehicle by the percentage of personal miles (personal miles divided by total miles driven). The annual lease value is determined using the IRS’s Annual Lease Value Table.

Summary

If your employees use union-owned vehicles for personal use, it’s important to know that personal use of a company vehicle is a taxable benefit, and that this usage must be reported on employee W-2s. It is crucial for employees to keep detailed records of all vehicle usage for both personal and business purposes. For more information about the taxation of personal use of company cars and for assistance with reporting, please don’t hesitate to call RBT CPAs. You can count on RBT CPAs to support all of your accounting, audit, tax, and advisory needs. Give us a call today and find out how we can be Remarkably Better Together.