Employer Truck Allowance/Mortgage Question

[Rubi513]

Negative ghost rider. Mine is dam sure taxed every month!!!

Same

[175gr7.62]

Clint, the truck allowance payment will be added to his taxable income so that should be calculated into the debt/income ratio. If that $1000/mo does not yet show up on his paystubs, his employer can provide a letter stating that he will be receiving it.

Thanks Randy.

My concern, for the sake of round numbers, is that say his debt is 2000 and his income is 8000, that gives him a DTI of 25%. Adding $1000 to both the numerator and denominator of that equation moves the DTI to 33%, so it isn't truly a wash as far as the banker man is concerned.

[bbqfan5909]

Ask his mortgage company. His situation was similar to mine, but they requested not adding debt during home purchasing process. Have to view it as if he may lose his job, hes still got a note to pay.

[dirtybay]

Agree. I’m a loan officer and best to direct this straight to their loan officer. The loan officer can see the entire package to advise from. But overall, auto allowance is used as income with 2 year history.

[Huntsman27]

I believe the taxability of a car allowance is dependent on the amount of business miles the vehicle in question is driven. It is my understanding that the IRS allows .62 per mile and if the number of business miles the vehicle is driven times .62 is greater than or equal to the amount of the allowance it is not taxable. If the number of business miles times .62 is less than the amount of the allowance then the difference is taxable.

This is the way it was explained to me when the company gave us a choice on a company vehicle or an allowance.

I would contact a tax expert on this issue to be sure. Additionally, I would think if the allowance covers the cost of the vehicle it shouldn't change debt ratio etc... He would have a new inquiry on his credit report which can sometimes have a negative effect on his credit score.

[Burnadell]

Yeah, Clint, hopefully he can use a good mortgage broker that will take it into consideration and work hard for him but, sadly, the underwriters work only on formulas.

[bbqfan5909]

Believe this does not hold up if company also provided fuel, as stated by OP.

Getting a bit off topic, have them reach out to mortgage company as I'm assuming they got pre approved.

I believe the taxability of a car allowance is dependent on the amount of business miles the vehicle in question is driven. It is my understanding that the IRS allows .62 per mile and if the number of business miles the vehicle is driven times .62 is greater than or equal to the amount of the allowance it is not taxable. If the number of business miles times .62 is less than the amount of the allowance then the difference is taxable.

This is the way it was explained to me when the company gave us a choice on a company vehicle or an allowance.

I would contact a tax expert on this issue to be sure. Additionally, I would think if the allowance covers the cost of the vehicle it shouldn't change debt ratio etc... He would have a new inquiry on his credit report which can sometimes have a negative effect on his credit score.

[zr2chevy22]

As it is a promotion would he also recieved a base pay raise in addition to the truck allowance? If so that could balance out the debt to income ratio if he get's a decent raise.

[bboswell]

Negative ghost rider. Mine is dam sure taxed every month!!!

Correct

Allowance is taxed, mileage reimbursement is not

[bboswell]

You can’t get much of a truck for $1000 per month on a 36 month note much less cover insurance out of that also

[aggie2000tx]

He will be upside down in a hurry if he has to drive a bunch. 1k a month isn’t much in todays truck market.

[powderburner]

As about vehicle insurance. I drive my personal truck but my company covers the insurance.

Personal for company. IF you are in an accident. You are liable unless you are covered under the company policy.

[captainsling]

Thanks Randy.

My concern, for the sake of round numbers, is that say his debt is 2000 and his income is 8000, that gives him a DTI of 25%. Adding $1000 to both the numerator and denominator of that equation moves the DTI to 33%, so it isn't truly a wash as far as the banker man is concerned.

Surely there is more than just a truck allowance in the promotion. His income should go up as well, which would lower the debt to income ratio. Just my 2 cents.

[youngbuck1]

A written explanation from him and his employer showing them making the payment should suffice. Unless they need a 12 month history of the payment being made by the company. Probably won’t need it but the letters of explanation should be able to not include in his monthly liabilities and exclude from his debts. However it will also depend on loan program, lender and if the underwriter is a dip **** or not. Best of luck to y’all.

[WRasco]

If he leased a truck for 2 year periods, would it change anything?