The IRS recently issued the maximum fair market value (FMV) amounts that designate the proper valuation rule for employers calculating fringe benefit income from employer-provided automobiles, trucks, and vans first made available for personal use in 2015. Taxpayers with employer-provided vehicles within the designated FMV amounts may apply the vehicle cents-per-mile rule or fleet average valuation rule, as appropriate.
An employer that has provided a vehicle for an employee’s personal use must include the value of that personal use in that employee’s income and wages as a fringe benefit under Code Sec. 61. Employers and taxpayers may calculate the value of their personal use using several valuation methods, including the cents-per-mile valuation rule outlined in Reg. §1.61-21(e) or the fleet average valuation rule under Reg. §1.61-21(d).
Cents-per-mile valuation rule
To qualify to use the cents-per-mile valuation rule, the employer must reasonably expect the vehicle to be regularly used in the employer’s business throughout the calendar year, or the vehicle must be used primarily by employees, including for commuting, and be driven at least 10,000 miles that calendar year.
Employers and employees arrive at the value of the fringe benefit provided in a particular calendar year by multiplying the standard mileage rate for the year by the total number of miles the vehicle is driven by the employee for personal purposes. The standard business mileage allowance rate for 2015 is 57.5 cents-per-mile (up from 56 cents-per-mile for 2014).
Employers and employees may not use the cents-per-mile rule, however, if the fair market value of the vehicle exceeds the sum of the maximum recovery deductions under Code Sec. 280F(a) for the first five years of service. The maximum 2015 FMV amounts for use of the cents-per-mile valuation rule are:
- $16,000 for a passenger automobile (the same as for 2014 and 2013); and
- $17,500 for a truck or van, including passenger automobiles such as minivans and sport utility vehicles, which are built on a truck chassis (up from $17,300 in 2014).
Employers maintaining a fleet of at least 20 automobiles can value the FMV of each automobile as equal to the average value of the entire fleet. The fleet average value is the average of the FMV of all automobiles used in the fleet.
The maximum FMV amounts for use of the fleet-average valuation rule in 2014 are $21,300 for a passenger automobile (the same as for 2014) and $22,900 for a truck or van (up from $22,600 in 2014).