car allowance taxed?
My husband receives a car allowance with each pay period. He also receives reimbursement for gas and maintenance. But nothing for car insurance. Now...
My husband receives a car allowance with each pay period. He also receives reimbursement for gas and maintenance. But nothing for car insurance. Now it seems the car allowance is taxable income on our W-2 but our H& R Block Tax Provider says it is not being taxed. But when I look at his W2 it shows up on line 1. I’m a little confused??? Can we deduct any of the car allowance off? How do we know if we are getting the full amount in reimbursement compared to the .48 mile reimbursement. Is there a standard way to compare?
Also, is there a depreciation deduction if he is putting a lot of miles on his car for business.
Yes, he keeps a mileage log and records of gas and maintenance reimbursement.
Your H&R provider is a little confused. If the allowance is on the W-2 it’s clearly taxable. The employer, for example, is free to compensate his employees for some, all or none of their costs of getting to and from work or from one work location to another…but the IRS operates under different rules.
Only business-related travel is deductible on one’s taxes…not communting to/from work. Your husband deducts these expenses at the rate of 48.5 cents a mile OR based on his actual expenses — not both. If he takes the standard rate of deduction based on miles driven for business purposes (the easier to document), no additional depreciation deduction is permitted as the depreciation factor is included in the mileage rate. See Form 2106 and related instructions for details.
Good luck.
If the car allowance is in box 1, then he *is* being taxed on it.
Did your husband keep a mileage log? Does he know how much he received "for gas and maintenance"? If he doesn’t have both, there is nothing that he can do.