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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Vehicle allowance vs. mileage reimbursement Date: 4/6/2013 8:00 PM
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Hello there! I started a new job on April 1, and although similar to my previous job in retail merchandising, the new job provides a vehicle allowance of $250/month. The old job had me track mileage from home to store to store to store to home, and their system subtracted the first 20 miles from home to store and the last 20 miles from home to store, and I would receive a set amount per-mile for everything that was left over.

Another monkey wrench is that my income has been so low for the past 5 years that I have not itemized on my taxes--and thus, beyond the store-to-store tracking, I did not track my mileage.

Because I'm getting married in September 2013, I will become part of a MFJ situation for 2013 and beyond (definitely including itemizing, and likely AMT). California; community property state.

So my questions are:
1) do I need to track my mileage now that I'm getting vehicle allowance? My employer has not given any indication that it will want or need to know this information.
2) am I correct in assuming the vehicle allowance will not have taxes withheld and that I do not need to pay taxes on that amount?
3) what, if any, are the impacts of my now being able to itemize work mileage on my tax return for 2013 and beyond?
4) Am I missing anything else?

If it matters, my new job territory is much closer to home than previous job. I am making out like a bandit on this vehicle allowance deal. I will probably use less than half of the gas I used to use to perform my job duties.

kasha
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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 118320 of 121585
Subject: Re: Vehicle allowance vs. mileage reimbursement Date: 4/6/2013 8:54 PM
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1) do I need to track my mileage now that I'm getting vehicle allowance? My employer has not given any indication that it will want or need to know this information.

Yes, you will need to track your own mileage just as before.

2) am I correct in assuming the vehicle allowance will not have taxes withheld and that I do not need to pay taxes on that amount?

No. Allowances like this are supposed to be treated just like your wages, subject to all of the usual payroll withholdings, including federal income tax, social security tax, medicare tax, state income tax, and California SDI.

I will note that even thought this has been the tax law for over a decade, many employers do not report these allowances correctly. Some will put them on a 1099-MISC (so you end up paying ALL of the social security and medicare taxes instead of just 1/2), and some don't report them at all.

3) what, if any, are the impacts of my now being able to itemize work mileage on my tax return for 2013 and beyond?

You would report your mileage on Form 2016. The results of that flow to miscellaneous itemized deduction on schedule A, where they are subjected to a 2% of AGI reduction. If anything is left after that, you'll get a tax benefit. Unless you're subject to AMT, where these expenses are disallowed.

4) Am I missing anything else?

Even if the $250 a month covers all of your vehicle expenses, you're getting the short end of the stick, as it's still taxable income and may not leave you enough to pay the expenses after reduction for taxes. The per-mile reimbursement is more work for the employer, but much fairer to the employee.

--Peter

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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 118324 of 121585
Subject: Re: Vehicle allowance vs. mileage reimbursement Date: 4/7/2013 10:41 PM
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Well, poo! :-(

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