Expensed Car Allowance

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.

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