Vehicle Reimbursement

Vehicle Reimbursement Policy

(Type Name of Business Here)

1. Purpose The purpose of this policy is to outline the procedures and guidelines for reimbursing employees for the business use of their personal vehicles. This includes the calculation and reimbursement of depreciation expenses under Section 179 expensing, bonus depreciation, and Modified Accelerated Cost Recovery System (MACRS) depreciation.

2. Scope This policy applies to all employees who use their personal vehicles for business purposes and seek reimbursement for associated expenses, including depreciation.

3. Reimbursement Eligibility Employees are eligible for vehicle reimbursement if:

• The vehicle is used for business purposes.

• The employee provides a receipt for the vehicle purchase showing ownership and cost.

• The employee maintains a mileage log that meets IRS requirements to substantiate business use percentage.

4. Reimbursement Request Procedure Employees must submit a Vehicle Reimbursement Request form, which includes the following information:

• Employee name

• Date of request

• Purchase price of the vehicle

• Taxes, license fees, and any rebates

• Business use percentage

• Calculation of the business basis of the vehicle

• Reimbursement request amounts for Section 179 expensing, bonus depreciation, MACRS depreciation, and straight-line depreciation

5. Required Documentation Employees must attach the following documents to their reimbursement request:

• Receipt for the vehicle purchase

• Mileage log substantiating business use percentage or certification to provide the log before the end of the year

• Any other documentation supporting the reimbursement amounts

6. Depreciation Reimbursement Calculation Reimbursement amounts will be calculated based on the following:

• Section 179 Expensing: Deduction for the business use percentage of the vehicle's cost, up to the allowable limit.

• Bonus Depreciation: Additional first-year depreciation deduction for the business use percentage of the vehicle's cost.

• MACRS Depreciation: Depreciation under the MACRS for the business use percentage of the vehicle's cost.

• Straight-Line Depreciation: Depreciation calculated on a straight-line basis for the business use percentage of the vehicle's cost.

7. Basis Reduction Employees must reduce the basis of their vehicle by the amount of reimbursement received for Section 179 expensing, bonus depreciation, and other depreciation. This reduction must be reflected in the employee's tax reporting for gains or losses on the vehicle.

8. Recapture Requirement Employees must notify the employer and reimburse the amount of any required recapture of Section 179 expensing or depreciation if the business use of the vehicle drops to 50% or less within five years of the reimbursement.

9. Employer Responsibilities The employer will:

• Review reimbursement requests to ensure compliance with this policy.

• Calculate the reimbursement amounts accurately.

• Provide a statement to the employee showing the total reimbursement and the amounts for each type of depreciation.

• Ensure the employee reduces the business basis of their vehicle by the reimbursement amount.

10. Approval Process Reimbursement requests must be approved by the designated company official. The official's signature and date of approval must be included on the reimbursement form.

11. Policy Review and Amendments This policy will be reviewed annually and may be amended as necessary to ensure compliance with applicable laws and regulations.

Vehicle Reimbursement Request Form

• Employee name: _______________________ Date: __________

• Purchase price: $_______________________

• Taxes: $_______________________

• License fees: $_______________________

• Less imputed interest (if a no interest loan): $_______________________

• Less rebates: $_______________________

• Net purchase price (total of above) equals original basis: $_______________________

• Business use percentage: ______%

• Business basis of new vehicle for reimbursement: $_______________________

• Reimbursement request (bonus MACRS straight-line Section 179): $_______________________

Employee Certification: With this reimbursement request, I:

• Attach a receipt for the vehicle purchase.

• Will reduce the basis of my vehicle by the amounts reimbursed for Section 179 expensing and/or depreciation.

• Will notify the employer of any required recapture of depreciation if business use drops below 50% within five years.

• Attach a mileage log or certify to provide it before the year-end.

Employee signature: ___________________________________________

Employer Approval: I hereby attest that I have checked this request for reimbursement and found it proper and in compliance with the reimbursement requirements. Our calculations show a reimbursement to you of $ ________.

• $_________ for Section 179 expensing

• $_________ for bonus depreciation

• $_________ for MACRS depreciation

• $_________ for straight-line depreciation

Signature for employer: _____________________________ Date: ________________

Printed: ____________________________ Title: _________________________

For insights on why do this and how it works, see Case Study: Trade-In on a New SUV—Reimbursement by Corporation.

This policy ensures that employees are reimbursed fairly for the business use of their vehicles while complying with IRS regulations and company guidelines.