Cents-Per-Mile Method of Valuing Use

The value of any personal use by an employee of your vehicle may be calculated by multiplying the standard mileage rate by the number of miles driven by an employee for personal purposes, if you provide your employee with the use of a vehicle that either:

• you reasonably expect will be regularly used in your business throughout the calendar year (or a shorter period that the vehicle is owned or leased by you)
• is driven primarily by employees for at least 10,000 miles in a calendar year.

A vehicle is considered "regularly used" in an employer's business if either at least 50 percent of its total mileage for the year is for the employer's business or it is generally used each workday in an employer-sponsored car pool to transport at least three employees to and from work. You may not use the cents-per-mile rate unless the same or comparable vehicle could be leased on a cents-per-mile basis. Once the cents-per-mile rate has been adopted for a vehicle, you must continue to use that valuation method until the vehicle no longer qualifies.

For 2011, the cents-per-mile method can be used only for cars that have a fair market value of $15,300 or less on the day they were first made available to an employee. The 2011 maximum value for a truck or van is $16,200. (This dollar amount is adjusted periodically to reflect inflation with the new numbers released in the spring) For cars having a value in excess of that amount, the value of the availability of the car is to be determined under the general fair market value rule or the annual lease value method.

From January 1, 2011 through June 30, 2011, the standard mileage rate for the business use of a car was 51 cents per mile. From July 1, 2011 through December 31, 2011, the standard mileage rate for business use of a car was 55.5 cents per mile. For 2012, the standard mileage rate will be continue to be 55.5 cents per mile.

Maintenance and insurance are included in the standard mileage rate. However, no reduction in the rate is allowed if you do not provide these services. The rate also includes the fair market value of employer-provided fuel for miles driven in the United States, Canada, and Mexico. If fuel is not provided by you as the employer, the rate may be reduced by no more than 5.5 cents.