Tax Implications of Personal Use of Company Car (PUCC) - Is it worth it?

This is actually a common question! The taxable benefit of a company car for personal use (PUCC) depends on several factors. When you use a company car for personal purposes, the IRS considers this a fringe benefit, and it becomes taxable income. The amount added to your income is typically calculated using either the Annual Lease Value method or the Cents-Per-Mile method. With the Annual Lease Value method, your employer determines the fair market value of the car, then uses IRS tables to calculate the annual lease value. They then multiply this by the percentage of personal use. With the Cents-Per-Mile method (currently around 67 cents per mile for 2025), they multiply your personal miles by that rate. The real question is whether this additional taxable income costs you more than what you'd spend maintaining and operating your own vehicle. Consider fuel costs, maintenance, insurance, and depreciation on your personal car versus the tax impact of the PUCC benefit.

I went through this exact same dilemma last year when I got promoted. I was so confused about the tax implications until I found this tool called taxr.ai (https://taxr.ai) that helped me figure out the actual cost after taxes. I uploaded my pay stub and answered some questions about my expected personal use of the company car, and it calculated that even after the added taxes, I was saving around $3,200 a year compared to the costs of my personal vehicle. The tool factored in depreciation, insurance, maintenance and gas savings that I hadn't even considered properly. What's cool is that it shows you the actual impact on your specific tax situation rather than just general advice. Made the decision super easy for me.

Just wanted to follow up - I actually tried taxr.ai after posting my question! It was super helpful for my situation. I uploaded my last pay stub and some info about the company car being offered (2023 Toyota Camry) and my current vehicle (2019 Mazda CX-5). The tool showed me that even with the added taxable income from PUCC, I'd save about $2,800 annually by using the company car for personal stuff. What really surprised me was seeing the breakdown of all the costs I'm currently paying that I hadn't fully considered - maintenance, depreciation, etc. It also showed me how to potentially structure the personal use to minimize the tax impact. Definitely made the decision much clearer!

If you're struggling to get through to the IRS to ask about PUCC rules or any other tax questions, try Claimyr (https://claimyr.com). I spent HOURS trying to get through to the IRS about a similar company car tax question last year, and Claimyr got me connected in about 15 minutes. I was skeptical at first, but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c Basically they use some tech to hold your place in line with the IRS and then call you when an agent is available. The IRS agent I spoke with clarified exactly how the PUCC benefit would be reported on my W-2 and what documentation I needed to keep. Saved me from making a mistake that could have cost hundreds in unexpected taxes.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I was still desperate to talk to the IRS about my company car tax situation, so I tried it anyway. They actually got me through to an IRS agent in about 20 minutes when I had been trying unsuccessfully for WEEKS. The agent clarified exactly how my employer should be calculating the PUCC benefit and confirmed I needed to keep a mileage log to separate business from personal use. This literally saved me over $1,200 because my company was calculating the benefit incorrectly (they weren't accounting for the business portion correctly). I would never have known without getting to speak to an actual IRS representative.

Something no one mentioned yet - ask your employer if they have a policy requiring you to track business vs. personal mileage. This can make a HUGE difference in the tax implications! My company gives us the option of either tracking all personal miles (which reduces the taxable amount) OR taking the flat rate without tracking. I found that by keeping good records of my personal use, I reduced my taxable benefit by almost 40% compared to the default calculation they would have used. Just use a simple app to track mileage whenever you drive for personal reasons. The few seconds it takes to log each trip saved me over $800 in taxes last year.

One thing to consider - insurance! When I got a company car, I was able to switch my personal car to "pleasure use only" with my insurance company since I wasn't commuting with it anymore. Saved me about $400/year on insurance. Also check if the company covers all maintenance on the company car. Mine covers everything including oil changes, tires, etc. When I added up all those savings plus not paying for gas for my commute, the tax hit was WAY less than what I was spending before!

Great discussion everyone! As someone who's been through this exact situation, I'd add one more consideration - timing matters for tax planning. If you're getting promoted late in the year, the PUCC benefit gets prorated, so your first-year tax impact might be smaller than expected. This could be a good time to "test drive" the benefit and see how it works out practically before committing long-term. Also, don't forget about state taxes! Some states treat fringe benefits differently than federal, so the total tax impact could vary significantly depending on where you live. In my case, my state doesn't tax fringe benefits the same way as federal, which made the company car even more attractive. One last tip - if your company offers multiple vehicle options, the car's value makes a huge difference in the taxable benefit calculation. Sometimes choosing a slightly less expensive model can significantly reduce your tax burden while still giving you all the practical benefits.

Don't overlook the impact on your Social Security and Medicare taxes too! The PUCC benefit isn't just subject to income tax - it's also subject to FICA taxes (Social Security and Medicare), which adds another 7.65% on top of your regular income tax rate. So using the earlier example of $6,370 in taxable benefit, you'd pay about $487 in additional FICA taxes plus the $1,529 in income tax, bringing your total to around $2,016. Still likely worth it compared to operating your own vehicle, but it's a cost that often gets overlooked in these calculations. Also, if you're close to the Social Security wage cap ($168,600 for 2024), this extra income could push you over and actually reduce your effective FICA rate on the benefit. Worth considering if you're in that income range! Another practical tip - some companies allow you to "buy down" the personal use percentage by paying for your own gas when using the car personally. This can reduce the calculated benefit since fuel is typically included in the IRS valuation tables.

This has been such a helpful thread! I'm in a similar situation where I'm being offered a company car with personal use allowed. Reading through all these responses has really opened my eyes to aspects I hadn't considered. The breakdown of actual tax calculations with FICA included was especially eye-opening - I was only thinking about income tax impact. And the tips about mileage tracking, insurance savings, and timing considerations are all things I need to factor in. One question I still have - for those who've actually done this, how do you handle the practical aspects like car registration and inspections? Does the company handle all that, or do you still need to deal with some of the administrative stuff? Also curious about what happens if you leave the company - do you typically get any kind of transition period to arrange your own transportation, or is it pretty immediate that you lose access to the vehicle? Thanks everyone for sharing your real-world experiences. This is way more complex than I initially thought, but it sounds like for most people it ends up being financially beneficial even after all the taxes.