Q:

Is a car allowance taxable?

A:

Quick Answer

If a taxpayer receives an advance or allowance for a car from an employer, the tax consequences depend on whether the employer uses an accountable or non-accountable reimbursement plan. Accountable plans are not taxable, while non-accountable reimbursement plans are taxable.

  Know More

Full Answer

With an accountable plan, the employer reimburses allowable business expenses. In this case, the reimbursement is not taxable and expenses are not deductible. Under a non-accountable plan, the payment may be a fixed amount per day or month with no documentation needed from the employee. The employer generally includes this on the W-2, and the taxpayer claims the business-use expenses of the car on Form 2106, according to IRS Publication 463.

Learn more about Taxes
Sources:

Related Questions

  • Q:

    Are disability and retirement income taxable?

    A:

    Some social security or tier-1 railroad retirement benefits are taxable if the taxpayer received additional income during the year, according to the IRS. For 2014 taxes, if all income plus half of the taxpayer's retirement benefits equals more than $25,000, it is possible that part of the benefits are taxable.

    Full Answer >
    Filed Under:
  • Q:

    Do you pay taxes on life insurance payouts?

    A:

    Life insurance that pays out on the death of an insured person is not taxable unless the policy was turned over to the recipient for a price, according IRS Publication 525. Any amount received in excess of the value of the insurance is interest and is taxable.

    Full Answer >
    Filed Under:
  • Q:

    Do you pay taxes on life insurance?

    A:

    In general, the proceeds from a life insurance policy paid to a beneficiary are not taxable and are not included as gross income on tax returns. However, any interest received is taxable and must be reported.

    Full Answer >
    Filed Under:
  • Q:

    Are VA disability benefits taxable?

    A:

    VA disability benefits are not taxable, according to the Internal Revenue Service. This includes disability compensation and pension payments for disabilities paid either to veterans or their families, grants for motor vehicles for certain disabled and vision-impaired veterans and grants for homes designed for wheelchair living.

    Full Answer >
    Filed Under:

Explore