Kansas Department of Administration

05-P-012 Employee Taxability of State-Owned or Leased Vehicles (Revises 04-P-029)

DATE: November 19, 2004
SUBJECT: Employee Taxability of State-Owned or Leased Vehicles
EFFECTIVE DATE: January 1, 2005
CONTACT: Roger Basinger (785) 296-5387 Roger.Basinger@da.state.ks.us
APPROVAL: Image of approval signature.
SUMMARY: IRS Changes to Cents-Per-Mile Valuation Rule for Calendar Year 2005

The Internal Revenue Service (IRS) has increased the mileage rate from 37.5 cents (for 2004) to 40.5 cents (for 2005) under the Cents-Per-Mile method of valuing an employee’s personal (commuting) use of a state-owned or leased vehicle. The new rate becomes effective January 1, 2005. The Cents-Per-Mile valuation is one of several methodologies that can be used to calculate fringe benefit income. Using this methodology, fringe benefit income is calculated by multiplying the 40.5 cents rate by the number of personal (commuting) miles driven by the employee in the state-owned or leased vehicle. To be eligible to use the Cents-Per-Mile method, at least 50% of the vehicle’s total mileage is used for the employer’s trade or business, or the vehicle is primarily used by employees and the total mileage for the vehicle exceeds 10,000 miles per year. The Cents-Per-Mile method may not be used for ‘luxury’ vehicles. If a vehicle is first made available to an employee for personal (commuting) use in calendar year 2005 and the agency wishes to use the Cents-Per-Mile method, the fair market value of the vehicle cannot exceed $14,800. Agencies and employees are also reminded that the only personal use of a state-owned or leased vehicle allowed under state law is to commute between the employee’s work station and home, and then in only limited situations.

Please note that this Informational Circular does not impact the State’s privately owned vehicle mileage reimbursement rate.

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