Expensed Car Allowance

stevewachtel73 — Mon, 09 Mar 2026 11:52:07 GMT

If my employer gives me a lump-sum car allowance every month, and requires me to also turn in business mileage every month, is the amount left over taxable income?

To be more clear:

Expense report every month with $500 car allowance + monthly business mileage. Will I need to report any of this on my taxes as income?

Re: Expensed Car Allowance

stevewachtel73 — Tue, 05 Apr 2022 14:14:03 GMT

To be more clear:

Expense report every month with $500 car allowance + business mileage. Will I need to report any of this on my taxes as income?

Re: Expensed Car Allowance

Cynthiad66 — Tue, 05 Apr 2022 14:47:18 GMT

It depends.

A standard car allowance is considered taxable income because it does not substantiate business use. A mileage reimbursement, however, remains non-taxable as long as it does not exceed the vehicle reimbursement amount determined by the IRS business mileage

If the car allowance is not included in box 1 of your W-2, we presume that the employer made the payment under an IRS accountable plan.

An accountable plan is a plan that follows the Internal Revenue Service (IRS) regulations for reimbursing workers for business expenses in which reimbursement is not counted as income. This means that reimbursements are not subject to withholding taxes or W-2 reporting.

Please ask your employer if you have further questions.

If you need to enter the amount in TurboTax, report the amount as other taxable income.

Down the left side of the screen, click on Federal.
Across the top of the screen, click on Income & expenses.
At the screen Your income and expenses, scroll down to Less common income.
Select Miscellaneous Income, click on Revisit/Start.
Choose Other income not already reported on a Form W-2 or Form 1099.

The new tax law eliminates all itemized deductions that are subject to the 2% of AGI limitation, including job-related mileage and other job related expenses, for 2018 through 2025. That means that a W-2 employee cannot claim any deduction for job-related mileage.

Click Here for additional information.

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Expensed Car Allowance

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