With the release of Rev. Proc. 2012-13, the IRS has set the maximum fair market value amounts regarding the proper valuation rule for employees calculating fringe benefit income from employer-provided automobiles, trucks, and vans first made available for personal use in 2012.
Taxpayers whose employers provide company cars (or trucks and vans) for their personal use must factor that usage into in his or her income and wages as fringe benefit income.
The taxpayers may calculate the value of their personal use using the cents-per-mile valuation rule. The calculation involves imputing the fair-market value of the employer-provided vehicle. The IRS limits the dollar amount of the fair market value of the employer’s vehicle. In 2012, the mileage allowance rate is 55.5 cents-per-mile and the maximum fair market value allowed in 2012 is $15,900 for a passenger automobile, and $16,700 for a truck or van. This means that the cents-per-mile rule cannot be used to value an automobile whose fair market value, as of the first day on which it is made available to any employee for personal use, exceeds certain amounts set by the IRS.
It is important to note that the maximum fair market values released by Rev. Proc. 2012-13 only applies to automobiles that were allowed to be used as personal property beginning in the year 2012. Therefore, if the automobile in question was first used for personal purposes prior to 2012, then the fair market value limits that apply are those designated by the IRS for those years.
Employers that maintain a fleet of at least 20 automobiles can value the fair market value of each automobile as equal to the average value of the entire fleet. This is known as the Fleet-average value method. This method averages the fair market value of all automobiles used in the fleet. The maximum fair market value for the fleet-average valuation allowed by the IRS in 2012 is $21,000 for a passenger automobile and $21,900 for a truck or van. If a vehicle within the fleet owned by the employer exceeds the maximum fair market value allowed by the IRS, then the fleet-average valuation rule cannot be used.