Employer Provided Truck and Car Expenses Tax Deductions

When an employee is provided a car by their employer, certain business use of the vehicle expenses are deductible from the employees personal tax return.

The amount that is 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

If the employer included the full value of the lease of the car in the employees income then the employee can deduct the value of the business use of the employer-provided car 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. Do not enter the value of the vehicle lease on Form 2106 when less than the full value of the lease was included on the employee’s Form W-2 because it is not deductible (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.

In the event that the employer reimburses the employee (i.e. an advance, allowance, or reimbursement) for the car expenses how these expenses are reported depends on whether the employer is under an accountable plan 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.

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