Chances are you're reading this blog because you're a business owner or supervisor who is trying to take care of your employees. There are various reasons one would want to gift a company car to staff.
Perhaps they are experiencing financial troubles and can't repair their vehicle. Maybe their sales performance was so stellar this year you broke company sales records, all thanks to them!
Regardless of the reason you're thinking about gifting a company car, there are some serious implications involved. You and your employee should sit down and discuss them before moving forward.
- Here at Wilmar Inc, we're not tax professionals. Our business is leasing work trucks and fleets. Know this blog is meant to be educational only!
- If you have questions about the tax implications of gifting a company car to an employee, talk to your CPA first!
All About Gifting Cars to Employees
The IRS wants in!
Small, infrequent gifts given to an employee are known as De Minimus by the IRS and not usually taxable. Custom coffee mugs or crystal desk trophies fall into this category. But the big gift of an expensive car may end up costing your employee quite a bit!
Currently, the "magic number" of a vehicle's value is $15,000. One can gift a car to someone, and as long as the vehicle's value is $14,999 or less, the recipient won't need to pay a gift tax to the IRS to receive it.
However, your employee may still be on the hook to transfer title, tags, pay the insurance, and so on. If you're giving this charitable gift because your employee is in dire financial straits, you might want to consider paying these expenses for your employee (they're taxable as fringe benefits to your employee).
- The IRS would treat these bonus payments basically the same as wages, so you'll be paying a payroll tax on them in most states.
If you're gifting a brand new vehicle worth $40,000, to a super-sales rep, know they WILL be answering to the taxman!
If My Employee is Struggling, Does This Count as a Charitable Donation?
No. It's an exciting idea, because if it did work this way you could write off your donation. But no, the only time a gift can be written off as a charitable donation is if your gift goes to a legitimate 501c3 non-profit organization.
We can imagine creative ways to work around this. Let's imagine that you do a lot of work for a local church, and your employee is a member of the church. We can imagine situations where a company could gift a vehicle to a legitimate church, hoping the church then donates it to your employee.
However, once you gift a vehicle to an organization, it becomes their property, to do with as they please. They could legally keep that vehicle for their fleet. It's risky and presents an ethics question, so you probably shouldn't go about it this way.
Can I Offer a Leased Company Vehicle to My Employee Instead?
Absolutely! Many companies lease individual vehicles, or even lease entire fleets, for employee use. Here at Wilmar, we can help you lease a single vehicle, and we have access to high quality, well maintained used trucks, vans, and cars too!
Whether you're looking to give the gift of a vehicle to an employee, or to provide them with reliable transportation to distant job sites, Wilmar Inc is here to help. Contact us today to learn more!
Related Reading & Resources: