A guide about vehicle expenses that are tax deductible from an employee’s personal tax return for employer-provided cars and trucks.

Many employers provide their employee’s with cars or trucks to do their job. However, not all employer provided vehicle expenses are covered by the employer. Further, often times the employee is compensated for the lease of the car in their paycheck. Therefore, while the employee is not actually paying for the car, they are managing the vehicle payments and employer provided vehicle expenses. With that said, how does an employee know what they can employer provided vehicle expenses they can deduct from their personal income taxes and what expenses are not deductible. This post provides an overview of what an employee can deduct from their personal income taxes. It uses information taken from the IRS website (IRS.gov) and aims to summarize this information into simple, easy to read terms. All sources are noted for reference as needed. In addition, links to any forms mentioned in this post are also provided.

How much can an employee deduct?

The amount deductible on an employees individual tax return as truck or car expenses deductions depends on a few things.

1. the amount the employer includes in the employee’s income for the vehicle expenses
2. the percentage of business and personal miles driven with the car for the tax year

The employee can deduct the business use value of the car if the full value of the car lease is included in the employee’s income. The employee can deduct this amount as vehicle expense deductions. This amount would be located on Form W-2, in box 1, Wages, tips, other compensation, and box 14.

Use Form 2106, Part II, Sections A and C to claim vehicle expenses. On line 23 of Section C enter the actual expenses. And on line 25 include the entire value of the employer-provided car. There is one scenario where you don’t enter the value of the vehicle lease on Form 2106. Don’t enter it when the full value is less than the value of the lease included on the employee’s W-2. This is because it’s not deductible. Further, this means that the employee’s Form W-2 only included the value of the personal use of the car.

For actual costs that the employee paid, which the employer did not provide or reimburse the employee for, deduct only the business portion of these costs. For this deduction complete Form 2106, Part II, Sections A and C; enter the actual costs on line 23 of Section C and leave line 25 blank.

If the employee is reimbursed in advance (i.e. an advance, allowance, or reimbursement) by their employer for car expenses, the way these expenses are reported depends on whether the employer is under an accountable or a nonaccountable plan. For more information on accountable and nonaccountable plans see post, How to Maximize Business Use Car Tax Deductions.

Reimbursements made under an accountable plan are not reported as pay on the employee’s tax return. Reimbursements made under a nonaccountable plan are treated as pay on the employee’s tax return.

How can Falcon Expenses Help?

Falcon Expenses, a fully mobile expense reporting app for iOS, makes it easy to capture business expenses and maximize business expense deductions. Whether you’re an employer, employee, or self-employed, Falcon Expenses makes it seamless and easy to log and track business expenses. Falcon Expenses is a fully mobile expense reporting app. With Falcon Expenses, scan receipts, enter cash expenses, track mileage expenses and log billable hours.

Below are some posts to get acquainted with Falcon Expenses features and their many benefits:

• How to Scan and Manage Receipts with Falcon Expenses
• How to Track Mileage Expenses with Falcon Expenses
• Falcon Expenses Expense Report Template & What Expense Reports Look Like
• How to Create an Expense Report with Falcon Expenses
• What is Included in Falcon Expenses Mileage Expense Log

? Download Falcon Expenses
Falcon Expenses is free to download. If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

About Falcon Expenses, Inc.

Falcon Expenses is an iOS solution for expense tracking and management. Scan receipts, we type merchant, date and amount, auto-track mileage expenses via GPS and log billable hours with an integrated timer. Quickly organize expenses by time period, project or client and easily prepare reports for email to anyone in PDF or spreadsheet formats, all from your phone. Use for reimbursements, taxes, record keeping or invoicing. Falcon Expenses is great for professionals, freelancers, realtors, business travelers, truckers and more. Find out more, here.