It is suggested that you fairly compensate your executives for using their personal automobile for business purposes. This would not only help build employee morale but also ensure your business does not get into trouble with the IRS.
In this article, we discuss the nuances of car allowances and what you must adhere to as a business. We also look at how much the average car allowance for executives is in 2020.
What is the average company car allowance?
A car allowance is among the most popular transportation benefits given to today's executives. A recent survey on executive benefits by Ayco, states:
- 50 responding firms revealed that their average Chief Executive Officer’s yearly car allowance was $23,900 back in 2017.
- Meanwhile, the figure that nearly 60 firms gave for senior executives was $19,300.
- A total of 40 firms that responded to other executives reported that their average yearly allowance was $14,200.
What costs do company car allowances cover?
Car allowances are designed to cover the wear and tear costs, gas costs, and insurance costs associated with any personal vehicle used for business purposes. Here are some other expenses that are important for companies to factor into the car allowances they give their executives:
- Oil changes
- Tire and brake pad replacements
Oil, tire, and brake costs are essential to incorporate into a car allowance policy because if your employees drive their personal vehicle more frequently as part of their job, their car will depreciate more quickly. Also, they will need to change oil, tires, and brake pads more often.
Insurance is also an important factor in car allowances because research shows that the majority of vehicle ownership costs go to insurance as well as depreciation. High-level insurance coverage means higher premiums, which your company should help employees to cover.
Car allowance programs & taxes
- Note that various companies have different programs for providing car allowances. For instance, some companies offer flat allowances that are taxable.
- The Internal Revenue Service set the standard mileage rate at 57.5 cents for each mile driven for business purposes as of 2020. This is a jump from the price of 54.5 cents that was allowed in 2018.
How can Fyle help with car allowances?
We offer top-of-the-line features for employees who receive a car allowance to manage and report their travel and other expenses. For instance, we enable employees to report expenses such as mileage, paper receipts, and electronic receipts with a mobile app. Also, we make it easy to maintain accurate mileage tracking using Google Maps and more.
Get in touch with us to learn more about Fyle for tracking your business-related expenses from one day to the next!