Let’s say you work in the trades and you use your personal van or truck while on the job. Your employer can reimburse you for its usage. It can either be through a vehicle allowance, or mileage reimbursement.
A vehicle allowance
You remember getting an allowance from your parents when you were a kid. The same general idea applies here. A vehicle allowance is what your employer gives you in exchange for the use of your personal vehicle while you’re working for them.
It’s a set amount over a given time period, and it’s meant to be used to cover the costs of using your own personal vehicle. The vehicle allowance covers things such as fuel and maintenance. The important thing about a vehicle allowance is that it’s a set amount. It’s not going to change based on the amount of driving you’ll do
Your employer may opt to offer you mileage reimbursement instead of the set monthly amount for a vehicle allowance. There’s usually more effort required on your part if this is the agreement you make with your employer. You’ll have to keep track of the miles you drive while using your personal vehicle on the job – and you’ll usually have to associate it with the customer you did the job for.
Most companies offer a mileage reimbursement based on an amount per mile. Often, they’ll set this amount to match the standard mileage rate allowed as deductible by the IRS. They can choose to pay you more – or even less – but matching what’s been approved by the IRS makes it easier for accounting purposes.
Is this taxable income?
There’s no federal mandate for private companies to offer employees a car allowance or mileage reimbursement. Companies, however, know it’s in their best interest – especially if they want to attract the best employees. Which version they offer usually comes down to the amount of driving.
For example, if you’re a plumber and the residential services company you work for has a relatively small footprint, you’ll probably be offered a vehicle allowance. But, let’s say your company offers service to a large geographical area. You might end up putting some considerable mileage on your vehicle. It might be better for you and your employer to agree to mileage reimbursement.
Either type of payment can be taxable income for you. This mostly depends on whether your vehicle usage has a direct business connection to the company. It requires your employer to offer substantiation to the IRS.
Does your employer offer this benefit? Employers affiliated with Nexstar are considered to be some of the best in the PHCE industry. They have a reputation for attracting top talent because of their salaries and benefits. The Nexstar Jobs job board offers exclusive opportunities for plumbing, electrical, and HVAC home service technicians across the country.