Expert: Ed McFarland - 8/16/2004

Question
I want to add a vehicle allowance benefit for my traveling employees.

I know that ....The 2004 Federal limit for nontaxable reimbursement is $0.375/mile. Most employers base their reimbursement on the Fed rate. If they pay less than the Fed rate then the employee can claim the difference as a deduction on their personal tax. If they are paid more than the fed rate, the employer would have to tax the difference as income.

But that is just a gas/wear and tear allowance.
My understanding is they can be given a tax free allowance up to the costs of the vehicle (Gas - repair - insurance - registration). I'm I correct or did I miss something?

I was trying to find some type of benchmarking for either the US or preferably the North East.
I want to be fair on the amount I elect but I also want to be competitive.

Thanks in advance for your help.

Dave Hrkach  

Answer
You have a choice, the standard mileage or actual expenses but not both. Most people opt for the standard because of the burden of record keeping.

Check out IRS publication 463.

For benchmarking check with your local trade association or chamber of commerce and ask what is SOP. Somebody will have an answer you like.

Good luck.