Final regs update employer-provided vehicle rules

Tax Hot Topics newsletter The IRS released final regulations (T.D. 9893) on special valuation rules when determining the amount an employee’s gross income for personal use of an employer-provided vehicle. The final rules adopt proposed regulations issued in August 2019 without substantive changes.

There are two special valuation methods (among others) that can be used to calculate the value of an employee’s personal use of an employer-provided vehicle (provided certain requirements are met for each) –- the vehicle-cents-per-mile valuation rule under Treas. Reg. Sec. 1.61-21(e) and the fleet-average valuation rule under Treas. Reg. Sec. 1.61-21(d). However, these special valuation methods cannot be used if the fair market value (FMV) of the vehicle exceeds a specified maximum amount on the first day the vehicle is made available to the employee.

The final regulations provide that the maximum FMVs for 2018 and 2019 for passenger automobiles, trucks and vans are $50,000 and $50,400, respectively (and adjusted in future years for inflation in accordance with the proposed regulations). These are significant increases from the applicable FMVs that applied before 2018. The final regulations also adopt several special transition rules described in the proposed regulations.

The final regulations generally apply to taxable years beginning on or after Feb. 5, 2020 (but taxpayers can choose to apply certain provisions beginning on or after Jan. 1, 2018).

Jeff Martin
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107

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