Personal Use of a Company Vehicle: How to Calculate the Taxable Amount (2026)

Your techs take the vans home. Some of them stop for groceries on the way, and one of them drives to his kid's game on Saturday. Under IRS rules, that personal use is a taxable fringe benefit, and it has to show up in their wages. Most small service businesses either don't do this at all or have their accountant plug in a guess at year end.

This guide shows how the IRS lets you put a number on personal use of a company vehicle in 2026, works the three methods through one example van, and shows why the method you pick (and the policy you write) can change the taxable amount by a factor of three.

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This is general information from IRS Publication 15-B, not tax advice. Payroll treatment depends on your facts, so confirm the method and the numbers with your CPA.

Step zero: check whether the van is taxable at all

Some work vehicles never create a taxable fringe benefit, no matter where they're parked at night. The IRS calls them qualified nonpersonal use vehicles. A van or pickup can qualify if it's permanently lettered with your company name and built out so personal use is unlikely: for a van, seating for the driver plus at most one passenger, plus permanent shelving or a cargo area that always carries work equipment. Our company vehicle policy guide walks through the full test.

If a van passes, stop here: there's nothing to calculate for it. The rest of this guide is for the vehicles that don't pass, which in most service fleets means the crew-cab pickup, the unmarked SUV the office manager drives, and the owner's truck.

How the IRS values personal use of a company vehicle: three methods

Besides plain fair market value, IRS Publication 15-B gives employers three special valuation rules for vehicles. Each one produces a dollar amount that goes into the employee's wages (or that the employee pays back to you).

1. The commuting rule: $1.50 each way

You value the vehicle at $1.50 per one-way commute, home to work or work to home. A tech who drives the van home every workday adds $3 a day to his wages. It's the simplest rule and usually the cheapest, but it comes with conditions:

• You require the employee to commute in the vehicle for a real business reason (for example, so they can respond to calls or start at the first job).
• You have a written policy that bans personal use other than commuting and de minimis use, such as a quick personal stop on the way home.
• The employee actually follows that policy.
• For a car, pickup or van, the driver isn't a control employee. For 2026 that generally means an officer paid $145,000 or more, a director, an employee paid $290,000 or more, or anyone who owns 1% or more of the business.

That last condition catches a lot of owner-operators: if you own the business and drive the company truck home, the commuting rule isn't available for your own truck.

2. The cents-per-mile rule: personal miles × the IRS rate

You multiply the employee's personal miles by the IRS standard mileage rate. For 2026, the IRS set that rate at 72.5 cents per mile in Notice 2026-10. In July it raised the business deduction rate to 76 cents for miles driven from July 1, citing fuel prices. That announcement doesn't mention valuing personal use of employer vehicles, so ask your CPA which rate to apply to second-half personal miles.

The rate already includes maintenance, insurance and fuel. If the employee pays for their own fuel, you can reduce the rate by up to 5.5 cents per mile. The rule has three limits:

• The vehicle's value when you first made it available for personal use can't be more than $61,700 for 2026.
• The vehicle has to be regularly used in your business. At least 50% business miles meets this, or the vehicle drives at least 10,000 miles a year mostly by employees.
• You have to start using the rule on the first day the vehicle is available for personal use, and keep using it in later years. You can switch to the commuting rule for any year the vehicle qualifies for it.

The catch is the input: you need an honest count of personal miles, which is the number most small businesses don't have.

3. The lease value rule: a share of the vehicle's annual lease value

You look up the vehicle's value in the IRS Annual Lease Value table, then include the share that matches personal use. A truck worth $45,000 has an annual lease value of $11,750. If 15% of its miles are personal, $1,762.50 goes into wages. Fuel you provide is added separately, either at market value or at 5.5 cents per mile. This method needs the same personal-mile records as cents-per-mile, plus the vehicle's fair market value, and it's the only one of the three that works for a vehicle worth more than $61,700.

One truck, three answers

Here is the same pickup run through all three rules. It's worth $45,000, it's driven 20,000 miles a year, 3,000 of those miles are personal, the driver takes it home 240 workdays a year, and the company pays for fuel.

The commuting rule comes out at about a third of the other two, because it only counts the drive to and from work, and everything else is banned by policy. That's the real decision here: a commuting-only policy that you can show is followed is worth more than any choice of formula. If your techs do use the trucks on weekends, the commuting rule isn't available and you're into cents-per-mile or lease value, which both depend on counting personal miles.

Where the records come from

Every method above rests on a fact that's hard to prove from memory: either that the truck was only used to commute, or how many miles were personal. That's where a GPS tracker earns its keep at tax time.

• Proving a commuting-only policy is followed. Spytec's after-hours use reporting shows when a vehicle moved outside the hours you set. A van that goes home at 5:30 and leaves at 7:00 the next morning looks very different in the report from one that's out on Saturday afternoon.
• Counting personal miles. Trip history records every trip with its time, route and distance. The tracker can't know why someone drove somewhere, so you or the driver mark which trips were personal, but you're classifying real trips instead of estimating a yearly total.
• Total and business miles. The same data gives you total miles for the year and the business share, which is what the lease value rule's percentage and the cents-per-mile regular-use test are built on. Our guide to IRS mileage log requirements covers what a usable record has to contain.

A Pulse OBD tracker plugs into the port under the dash, so you can put one in the take-home vehicles first, which are the ones this rule is about.

Getting it onto the paycheck

Whichever method you use, the value is treated as wages. A few rules from Publication 15-B make this easier than it sounds:

• Timing. You can treat the benefit as paid per pay period, quarterly, or once a year, as long as it's at least annually. Benefits provided in November and December can be treated as paid in the next year, which helps if you settle personal use at year end.
• Income tax withholding is optional for this benefit. You can choose not to withhold income tax on personal use of a vehicle if you notify the employee in writing (generally by January 31) and report the value on their W-2. Social Security and Medicare still have to be withheld.
• The employee can pay you back instead. Publication 15-B says the value must be included in wages or reimbursed by the employee.

If you're buying or replacing trucks this year, the purchase side has its own rules: see our guide to Section 179 for service fleets.

Frequently asked questions

Is personal use of a company vehicle taxable?

Generally yes. Personal use of an employer-provided vehicle, including commuting, is a taxable fringe benefit that has to be valued and included in the employee's wages or reimbursed. The main exception for service fleets is a qualified nonpersonal use vehicle, such as a lettered van with restricted seating and permanent shelving, where personal use isn't taxable.

How much is the commuting rule in 2026?

The commuting rule values each one-way commute at $1.50, so a round trip is $3. It only applies if you require the employee to commute in the vehicle, have a written policy banning other personal use, the employee follows it, and the driver of a car, pickup or van isn't a control employee such as an owner of 1% or more.

What is the cents-per-mile rate for personal use of a company car in 2026?

The IRS set the 2026 standard mileage rate at 72.5 cents per mile in Notice 2026-10, and the cents-per-mile rule multiplies that rate by the employee's personal miles. A July 2026 announcement raised the business deduction rate to 76 cents from July 1 but doesn't address vehicle valuation, so confirm with your CPA which rate to use for later personal miles. The vehicle's value can't exceed $61,700 for 2026.

Can a business owner use the commuting rule for their own truck?

Usually not. The commuting rule can't be used for a car, pickup or van driven by a control employee, which for 2026 includes anyone owning 1% or more of the business, directors, officers paid $145,000 or more, and employees paid $290,000 or more. Owners generally use the cents-per-mile or lease value rule instead.

How do I track personal miles on a company vehicle?

Use a trip record rather than a year-end estimate. A GPS tracker logs every trip with its time, route and distance, and after-hours reports show use outside work hours. You or the driver then mark which trips were personal, and the total feeds the cents-per-mile or lease value calculation.

The bottom line

Personal use of a company vehicle has a price, and the IRS gives you three ways to set it. For most service fleets the cheapest legitimate answer is a written commuting-only policy valued at $1.50 each way, but only if you can show it's followed, and never for the owner's own truck. When the trucks do get personal use, the number depends on an honest count of personal miles. Either way, trip records turn a year-end argument with your accountant into a lookup.