Fringe benefits are taxable for purposes of federal income tax and FICA tax. The most common form of fringe benefit provided by counties is the automobile. The amount of the taxable fringe benefit is the value of the amount of personal use of the automobile (as opposed to use for county purposes). There are four methods of calculating the value of the personal use of the vehicle:
- fair market value method,
- table value method,
- cents-per-mile method, and
- commuting value method.
The first two methods are based on the value of the automobile and the actual amount of personal use. The cents-per-mile method is the number of personal miles driven by the employee multiplied by the standard mileage rate, which is the same as the rate taxpayers use to deduct the business use of a personally owned car. If the employee pays for the gas, the rate is reduced. The commuting value method can be used only when the employer has a written policy that restricts the employee’s personal use of the car to commuting to and from work. Under the commuting value method the use is valued at $1.50 per one-way commute, or $3.00 per round trip. The commuting value method can be used only for ordinary employees. It cannot be used for elected officials or certain other highly compensated employees. The rules governing taxation of fringe benefits are complex and must be carefully reviewed. These regulations can be found at 26 C.F.R. § 1.61-21.