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Personal Use of Company Vehicles - Employees’ Guide
December 20, 2023 - 2 min read

Can Employees Use Company Vehicles for Personal Miles?

Employees can generally use company cars for personal purposes. In fact, a company car is typically considered a very attractive benefit. However, there are tax rules that govern the personal use of these cars versus the business use.

So, you should make sure you properly track your business and personal use of the car and keep careful records of this use.

Should you record the personal use of your company vehicle?

It is vital that you record all the miles that you drive the company vehicle and how it is being used for both personal and business uses. Your company will treat these uses differently for tax purposes. Additionally, if you use the company vehicle for any purpose that you cannot substantiate as being for business, it is considered personal use of the company vehicle and is taxable for you and your employer. If you do not keep track of when you use the company car for personal use and business use, it will all be considered personal use.

The easiest way to track your mileage is to use an app, such as the Driversnote mileage tracker, that will automatically record your mileage. Although, you can also create manual trips if you prefer. Driversnote also makes it easy to manage and categorize trips as business or personal and even add a note if you want.

See how to keep compliant mileage records of your driving.

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Is using a company car for personal use considered a benefit?

If an employer allows you to use a company car for personal use, it is considered to be a non-cash fringe benefit. The Internal Revenue Service (IRS) will treat this as taxable compensation. Therefore your employer will withhold federal income taxes, Medicare taxes, and Social Security taxes from your paycheck based on the value of your personal use of the company car.

Any use of the company car for any non-business purposes is considered to be personal use. This would include commuting to and from work, running personal errands, using the car on the weekend or for a vacation, or allowing someone other than a company employee to drive the car. There are some exceptions to recording the personal use of a company car. Some of these exceptions include personal use that is so small it is not worth recording, such as an uncommon and very brief side trip, using a demonstration vehicle and following certain restrictions, or using specially designed company vehicles that make personal use unlikely.

Should employees pay back for the personal use of company vehicles?

You could arrange with your employer to pay the company for your personal use of a company car. But, it is more common for employees to keep a record of both their personal and business use of the company car. Then, the employer will withhold taxes from your pay based on the value of the company car personal use.

FAQ

You need to keep a log of all of the business trips you make, including the mileage and the purpose of the trip, then, you can extract the business miles from the total miles you've traveled. If you use Driversnote, you can have your mileage automatically recorded. Then, you can categorize the trip and add a note concerning its purpose.
If you used your company car for personal use, you would find it reported in boxes 1, 3, 5, and 14 on your Form W-2.
If your employer permits, you can keep your company car at home. However, any non-business use, such as commuting to and from work or using the car on weekends, is personal use, and the value of this use of the vehicle will be taxed.

How to automate your mileage logbook

Manually filling out your logbook can get tedious - see how to automatically track trips for your mileage reimbursement or deductions.

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