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Company Car or Car Allowance

Company Car or Car Allowance

Old Feb 4th 2015, 8:52 am
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Arrow Company Car or Car Allowance

Hi all

I was searching for anything similar but couldnt find anything so wanted to ask the wonderful forum for help

I have a million and 1 tax questions which i wont bore you with but one which i wanted to ask was about Car Allowance/Company Car

My company have offered me a company car when i relocate to Austin (TX) later this year, i wanted to see if anyone had any info on if it is beneficial for them to provide a car as a benefit or to get an allowance and do it myself?

Any help is greatly appreciated!
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Old Feb 4th 2015, 12:35 pm
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Default Re: Company Car or Car Allowance

The answer to this really depends on your tax situation and how much they will reiburse you for car expenses.

When I was a road warrior, covering in excess of 40k miles per year, I used my own car and took mileage. The allowance my company gave was way bellow the government rate so I got a good reduction on taxes come April 15th. We almost always have to pay the IRS due to my wife working a couple of 1099 jobs!

I didn't have the option of a company car, but I was able to buy a top-of-the-line, new vehicle and the allowance more than covered the payments, insurance, gas and depreciation, plus I owned the car if anything went wrong and I lost the job.

The latter actually happened when I was laid off not too long after buying a new car, so I ended up trading it for something a little older and reducing the crippling $500/Mo payments!
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Old Feb 4th 2015, 12:39 pm
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Default Re: Company Car or Car Allowance

Smart move being able to buy the car, sounds like a good idea. I think i should be pretty stable but in the UK i get £500pm for a company car (they provide the car Audi A5). They said i would get a company car in the US too however i wasnt sure of the tax implications of taking the car as a benefit.

It isnt essential for my job but is a benefit. I couldnt see anything online where i could see if anyone had done something similar. I am also the first person from our company to move to America so its new to them as well. We have 100 people so not a huge company
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Old Feb 4th 2015, 1:00 pm
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Default Re: Company Car or Car Allowance

Hi Jamdodj,

I'm in a similar situation to you, small company, first person to be moved over to the US, etc..

I have a company provided vehicle which is used more for personal use than company. It seems the personal tax for this is high (circa 5c per mile.... not 100% sure) - the company got a major shock at the end of the first year.

I'm lucky in that I agreed a net $ salary with the company and have been able to leave the hassles of company/personal taxes to the company accountants.

Basically - If we were doing it again, we'd go down the personal vehicle route and have a company use allowance !

Carl.

Last edited by MtbbikeVanlife; Feb 4th 2015 at 1:01 pm. Reason: Added a sentence.
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Old Feb 4th 2015, 1:08 pm
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Default Re: Company Car or Car Allowance

Hi Carl,

That is a great help, i will speak to our HR team here. I guess i just dont want to have that shock added cost at the end of the year personally. There is already so much to take in as im sure you have found!

James
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Old Feb 5th 2015, 7:26 pm
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Default Re: Company Car or Car Allowance

The Internal Revenue Service has standard mileage rates: 2014 Standard Mileage Rates

Given the fact that the price of fuel has plummeted in the last few months, I assume that the rate will be lower for 2015. Do note that the IRS has standard for the entire US even though fuel prices can vary widely. Texas has relatively low fuel prices. [the site of GasBuddy.com - Find Low Gas Prices in the USA and Canada is a good source]. Do note that diesel is usually higher priced than gasoline and seems to be more standardized across the US [relatives in New Jersey pay 50 cents a less a gallon than we here in Los Angeles. However, diesel is the same price, go figure].

A company car used for personal purposes is a taxable fringe benefit. See IRS Taxable Fringe Benefits for a Company Car | Chron.com

In Texas people are really into big SUV's and Pickup trucks. A friend in Houston owned a Honda Fit and was in an accident called a "Texas sandwich." The car was "totaled" but all the safety features worked.

Quite often, in the car benefit situation, many people will lease the car rather than purchase. [On the operating expense side of things, leasing is often cheaper if you don't plan to keep the car all that long]. A firm I used to work for leased a car for my use. When the lease was up, I simply bought the car since the car was worth a lot more than its residual. BTW, expensive cars often have comparitively lower lease rates due to high residual values [BMW, Merc-B and Lexus].

If you have some type of company car benefit, make sure to keep meticulous records of usage.

As to what to do -- do the math for what you will be using the car for.

Last edited by S Folinsky; Feb 5th 2015 at 7:29 pm.
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Old Feb 9th 2015, 10:38 am
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Default Re: Company Car or Car Allowance

Fantastic, thank you very much for your help on this. Will check through all the links but starting to get my head around it all now
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