2106 - auto expenses

[oceanlovin'ea]

Helping client prepare for 2015. He purchased a new truck to use for work. He is a W-2 employee, a salesman. The company wants him to have a company truck but he had to go purchase the truck himself. They pay him $750 a month for vehicle expenses. The $750 is added to his income. This is to cover the payment on the truck and insurance, etc. So he can deduct his vehicle expenses on Form 2106 and schedule A. The company gave him a gas card. They pay for all the gas. So I am thinking that he has to use actual expenses instead of mileage since he isn't paying for the gas. Or can he use mileage?
If he uses actual, he can also take depreciation on the truck. Hopefully he stays at the job long term and won't have to pay back the depreciation if he would leave.

Any suggestions would be appreciated.

Linda EA

[Roland Slugg]

You are generally correct. If he uses actual expenses, he can take depreciation on the truck, but he can't deduct the cost of gas as his employer is paying (or reimbursing) for that. On the other hand, if the gas reimbursement is ALSO included in his W-2 wages, then he can deduct the gas as well.

Now the tricky part: If the gas reimbursement (or direct payment by his employer) is NOT included in his W-2 wages, then he can not use the SMR. That's because the cost of gas is included in the SMR. Thus, it looks like he will be required to use actual expenses.

He might be better off if he can arrange for the employer to buy the truck and provide it for his use, in exchange for a reduced salary or commission arrangement. This is especially true if he doesn't itemize on his own tax returns, and even if he does, there is still the 2% ND haircut.

[ddoshan]

Been awhile now but I did have a client in a similar situation. As I recall we did use the SMR (right or wrong?) and deducted the gas reimbursement he received on the 2106. Apparently I / we were not allowed to use SMR?

[oceanlovin'ea]

gas card

He has a company gas card to use for gas. So there is no reimbursement for gas.

He worked for this company for years and wanted a sales position that finally came available but they gave it to someone else. So he left and went to work for another company. The other person didn't work out. They went to him and offered him the job. He had stipulations to coming back to them. They wouldn't give him a company truck. I can't remember what the reason was. But they agreed to give him $750 a month car allowance to cover the truck payment and other expenses.
'
I guess you are right about having to use actual expenses which don't include the vehicle payment. He can take the interest on the vehicle and his maintenance and insurance. He might also have some additional expenses related to being a salesman. Cell phone might be one thing.
Their mortgage interest isn't very high as they live in a modest home that was a foreclosure and he remodeled it with the help of his father.

We will just see how it goes next year. Thanks for the input.

Linda, EA

[Gretel]

Been awhile now but I did have a client in a similar situation. As I recall we did use the SMR (right or wrong?) and deducted the gas reimbursement he received on the 2106. Apparently I / we were not allowed to use SMR?

Dito, I am much interested in getting clarification. I tend to trust Roland's opinion but would like to see something confirmative - Roland can you point to code/regulation for this issue?