Publication 15b |
2001 Tax Year |
Lease Value Rule
Under this rule, you determine the value of an automobile you provide to an employee by using its annual lease value. For an automobile provided
only part of the year, use either its prorated annual lease value or its daily lease value.
If the automobile is used by the employee in your business, you generally reduce the lease value by the amount that is excluded from the employee's
wages as a working condition benefit. However, you can choose to include the entire lease value in the employee's wages. See Vehicle Allocation
Rules under Working Condition Benefits in section 2.
Automobile.
For this rule, an automobile is any 4-wheeled vehicle (such as a car, pickup truck, or van) manufactured primarily for use on public streets,
roads, and highways.
Consistency requirements.
If you use the lease value rule, the following requirements apply:
- You must begin using this rule on the first day you make the automobile available to any employee for personal use. However, the following
exceptions apply:
- If you use the commuting rule (discussed earlier) when you first make the automobile available to any employee for personal use, you can
change to the lease value rule on the first day for which you do not use the commuting rule.
- If you use the cents-per-mile rule (discussed earlier) when you first make the automobile available to any employee for personal use, you
can change to the lease value rule on the first day on which the automobile no longer qualifies for the cents-per-mile rule.
- You must use this rule for all later years in which you make the automobile available to any employee, except that you can use the commuting
rule for any year during which use of the automobile qualifies.
- You must continue to use this rule if you provide a replacement automobile to the employee and your primary reason for the replacement is to
reduce federal taxes.
Annual Lease Value
Generally, you figure the annual lease value of an automobile as follows.
- Determine the fair market value of the automobile on the first date it is available to any employee for personal use.
- Using the following Annual Lease Value Table, read down column (1) until you come to the dollar range within which the fair
market value of the automobile falls. Then read across to column (2) to find the annual lease value.
Annual Lease Value Table
(1) |
(2) |
Automobile Fair Market Value |
Annual
Lease Value |
$0 to 999 |
$ 600 |
1,000 to 1,999 |
850 |
2,000 to 2,999 |
1,100 |
3,000 to 3,999 |
1,350 |
4,000 to 4,999 |
1,600 |
5,000 to 5,999 |
1,850 |
6,000 to 6,999 |
2,100 |
7,000 to 7,999 |
2,350 |
8,000 to 8,999 |
2,600 |
9,000 to 9,999 |
2,850 |
10,000 to 10,999 |
3,100 |
11,000 to 11,999 |
3,350 |
12,000 to 12,999 |
3,600 |
13,000 to 13,999 |
3,850 |
14,000 to 14,999 |
4,100 |
15,000 to 15,999 |
4,350 |
16,000 to 16,999 |
4,600 |
17,000 to 17,999 |
4,850 |
18,000 to 18,999 |
5,100 |
19,000 to 19,999 |
5,350 |
20,000 to 20,999 |
5,600 |
21,000 to 21,999 |
5,850 |
22,000 to 22,999 |
6,100 |
23,000 to 23,999 |
6,350 |
24,000 to 24,999 |
6,600 |
25,000 to 25,999 |
6,850 |
26,000 to 27,999 |
7,250 |
28,000 to 29,999 |
7,750 |
30,000 to 31,999 |
8,250 |
32,000 to 33,999 |
8,750 |
34,000 to 35,999 |
9,250 |
36,000 to 37,999 |
9,750 |
38,000 to 39,999 |
10,250 |
40,000 to 41,999 |
10,750 |
42,000 to 43,999 |
11,250 |
44,000 to 45,999 |
11,750 |
46,000 to 47,999 |
12,250 |
48,000 to 49,999 |
12,750 |
50,000 to 51,999 |
13,250 |
52,000 to 53,999 |
13,750 |
54,000 to 55,999 |
14,250 |
56,000 to 57,999 |
14,750 |
58,000 to 59,999 |
15,250 |
For automobiles with a fair market value of more than $59,999, the annual lease value equals (.25 × the fair market value of the automobile)
+ $500.
Fair market value.
The fair market value of an automobile is the amount a person would pay to buy it from a third party, in an arm's-length transaction, in the area
in which the automobile is bought or leased. That amount includes all purchase expenses, such as sales tax and title fees.
If you have 20 or more automobiles, see section 1.61-21(d)(5)(v) of the regulations. If you and the employee own or lease the automobile
together, see section 1.61-21(d)(2)(ii) of the regulations.
You do not have to include the value of a telephone or any specialized equipment added to, or carried in, the automobile if the equipment is
necessary for your business. However, include the value of specialized equipment if the employee to whom the automobile is available uses the
specialized equipment in a trade or business other than yours.
Neither the amount the employee considers to be the value of the benefit nor your cost for either buying or leasing the automobile determines its
fair market value. However, see Safe-harbor value, next.
Safe-harbor value.
You may be able to use a safe-harbor value as the fair market value. For an automobile you bought at arm's length, the safe-harbor value is your
cost, including tax, title, and other purchase expenses. You cannot have been the manufacturer of the automobile.
For an automobile you lease, you can use any of the following as the safe-harbor value.
- The manufacturer's invoice price (including options) plus 4%.
- The manufacturer's suggested retail price minus 8% (including sales tax, title, and other expenses of purchase).
- The retail value of the automobile reported by a nationally recognized pricing source if that retail value is reasonable for that
automobile.
Items included in annual lease value table.
Each annual lease value in the table includes the value of maintenance and insurance for the automobile. Do not reduce the annual lease value by
the value of any of these services that you did not provide. For example, do not reduce the annual lease value by the value of a maintenance service
contract or insurance you did not provide. (You can take into account the services actually provided for the automobile by using the general valuation
rule discussed earlier.)
Items not included.
The annual lease value does not include the value of fuel you provide to an employee for personal use, regardless of whether you provide it,
reimburse its cost, or have it charged to you. You must include the value of the fuel separately in the employee's wages. You can value fuel you
provided at fair market value or at 5.5 cents per mile for all miles driven by the employee. However, you cannot value at 5.5 cents per mile fuel you
provide for miles driven outside the United States (including its possessions and territories), Canada, and Mexico.
If you reimburse an employee for the cost of fuel, or have it charged to you, you generally value the fuel at the amount you reimburse, or the
amount charged to you if it was bought at arm's length.
If you have 20 or more automobiles, see section 1.61-21(d)(3)(ii)(D) of the regulations.
If you provide any service other than maintenance and insurance for an automobile, you must add the fair market value of that service to the annual
lease value of the automobile to figure the value of the benefit.
4-year lease term.
The annual lease values in the table are based on a 4-year lease term. These values will generally stay the same for the period that begins with
the first date you use this rule for the automobile and ends on December 31 of the fourth full calendar year following that date.
Figure the annual lease value for each later 4-year period by determining the fair market value of the automobile on January 1 of the first year of
the later 4-year period and selecting the amount in column 2 of the table that corresponds to the appropriate dollar range in column 1.
Using the special accounting rule.
If you use the special accounting rule for fringe benefits discussed in section 4, you can figure the annual lease value for each later 4-year
period at the beginning of the special accounting period that starts immediately before the January 1 date described in the previous paragraph.
For example, assume that you use the special accounting rule and that, beginning on November 1, 2001, the special accounting period is November 1
to October 31. You elected to use the lease value rule as of January 1, 2002. You can refigure the annual lease value on November 1, 2005, rather than
on January 1, 2006.
Transferring an automobile from one employee to another.
Unless the primary purpose of the transfer is to reduce federal taxes, you can refigure the annual lease value based on the fair market value of
the automobile on January 1 of the calendar year of transfer.
However, if you use the special accounting rule for fringe benefits discussed in section 4, you can refigure the annual lease value (based on the
fair market value of the automobile) at the beginning of the special accounting period in which the transfer occurs.
Prorated Annual Lease Value
If you provide an automobile to an employee for a continuous period of 30 or more days but less than an entire calendar year, you can prorate the
annual lease value. Figure the prorated annual lease value by multiplying the annual lease value by a fraction, using the number of days of
availability as the numerator and 365 as the denominator.
If you provide an automobile continuously for at least 30 days, but the period covers 2 calendar years (2 special accounting periods if you are
using the special accounting rule for fringe benefits discussed in section 4), you can use the prorated annual lease value or the daily lease value.
If you have 20 or more automobiles, see section 1.61-21(d)(6) of the regulations.
If an automobile is unavailable to the employee because of his or her personal reasons (for example, if the employee is on vacation), you cannot
take into account the periods of unavailability when you use a prorated annual lease value.
You cannot use a prorated annual lease value if the reduction of federal tax is the main reason the automobile is unavailable.
Daily Lease Value
If you provide an automobile to an employee for a continuous period of less than 30 days, use the daily lease value to figure its value. Figure the
daily lease value by multiplying the annual lease value by a fraction, using four times the number of days of availability as the numerator and 365 as
the denominator.
However, you can apply a prorated annual lease value for a period of continuous availability of less than 30 days by treating the automobile as if
it had been available for 30 days. Use a prorated annual lease value if it would result in a lower valuation than applying the daily lease value to
the shorter period of availability.
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