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Subject:  Re: Vehicle allowance vs. mileage reimbursement Date:  4/6/2013  8:54 PM
Author:  ptheland Number:  118320 of 130422

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.

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