Generally, if a company car is used only for business purposes (or if the personal use is de minimis), there is no income to the employee. However, if there is income to the employee, IRS has set up two additional methods: cents-per-mile and fleet-average rules. (In order for these methods to be used, however, the vehicle's fair market value must not exceed specified dollar limits.)
Fleet-Average Rule: The fleet-average rule governs employers operating a fleet of 20 or more qualifying vehicles (depending on the average lease value). The IRS has set up the maximum vehicle values to be used in calendar year 2010. The maximum values for which the fleet-average rule may be used are $20,300 for passenger automobiles and $21,000 for trucks or vans (up from $19,900 for both in 2009).
Cents-Per-Mile: The cents-per-mile rule determines the value of an employee's personal use by multiplying the standard mileage rate (50 cents per mile for 2010) by the number of miles driven for personal purposes. The maximum values for the cents-per-mile rule are $15,300 for passenger automobiles and $16,000 for trucks or vans (up from $15,000 and $15,200, respectively, in 2009).
Click here to view Rev. Proc 2010-10, 2010-3 I.R.B. 300 (Jan 14, 2010)
