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Maximum FMV Amounts Released

03.16.2016

OLYMPUS DIGITAL CAMERAThe IRS has issued the maximum fair market value (FMV) amounts that trigger certain valuation rules for employers calculating fringe benefit income from employer-provided automobiles, trucks, and vans first made available for personal use in 2016 (Notice 2016-12).

Internal Revenue Code Section 61 provides that an employee whose employer has provided a vehicle for personal use must include the value of that personal use in his or her income and wages as a fringe benefit. Employers and taxpayers may calculate the value of their personal use using several valuation methods, including the cents-per-mile valuation rule or the fleet average valuation rule.

Cents-per-mile valuation rule

Employers and employees may arrive at the value of the fringe benefit provided in a particular calendar year by multiplying the standard mileage rate for the year by the total number of miles the vehicle is driven by the employee for personal purposes. The standard business mileage allowance rate for 2016 is 54 cents-per-mile.

Employers and employees may not use the cents-per-mile rule, however, if the fair market value of the vehicle exceeds certain amounts: the sum of the maximum recovery deductions for the first five years of service. Under this computation, the maximum 2016 FMV amounts for use of the cents-per-mile valuation rule are:

  • $15,900 for a passenger automobile (down from $16,000 for 2015); and
  • $17,700 for a truck or van, including passenger automobiles such as minivans and sport utility vehicles, which are built on a truck chassis (up from $17,500 for 2015).

Fleet average valuation

Employers maintaining a fleet of at least 20 automobiles can value the FMV of each automobile as equal to the average value of the entire fleet. The fleet average value is the average of the FMV of all automobiles used in the fleet.

The maximum FMV amounts for use of the fleet-average valuation rule in 2016 are $21,300 for a passenger automobile (the same as for 2015) and $23,100 for a truck or van (up from $22,900 for 2015).

Richie D. Kingree, CPAIf you have any questions about valuation rules, please contact your tax advisor or Richie Kingree, Manager, Tax Services, at 314.983.1272 or ringree@bswllc.com.

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