Employer Truck Allowance/Mortgage Question

[jmac24]

auto allowances are taxable, just make sure you save enough receipts each year to offset them.

[AJMag]

If it's a FAVR program that's being run properly, it should be tax free to the employee from what i understand, according to the admin for our company's FAVR program. It sounds identical but the company has to be following the correct guidelines

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[bowhuntertex]

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

They typically don't tax it, but some companies do. When I worked for those that taxed it I was able to write off my milage on my taxes since once it is taxed it really isn't a vehicle allowance anymore and is really just added salary.

[caa4612]

My truck allowance is taxed. It just becomes part of the salary. I don't even look at it as a truck allowance.

[JTRichardson]

They typically don't tax it, but some companies do. When I worked for those that taxed it I was able to write off my milage on my taxes since once it is taxed it really isn't a vehicle allowance anymore and is really just added salary.

I think the reason it is taxed, is because they are also paying mileage for it, which is not taxable

I have not seen anyone that is giving tax free vehicle allowances, unless the vehicle allowance is a "flat rate" for monthly mileage

EDIT: On your original question, if his mortgage company is halfway intelligent, then a letter of explanation should cover this with no more questions asked. I went through something similar in April of this year with business expenses that I pay for with a personal CC - A letter of explanation and showing them that I get reimbursed for these costs was all it took.

Best of luck to your boy on his house hunt, I know how stressful it can be!

[SaintBlaise]

Run it by Trey Powers. He advertises here for mortgages. Several of us have used him for re-fi's, or even just questions.

[twosixteens]

Truck allowance is non-taxable.

Somebody owes me back taxes for 23 years

[Tex_Cattleman]

It WILL cause a debt/income ratio issue. Per Fannie Mae guidelines, to be used as acceptable stable income, it must be received for 2 years.

Love,
Trey Powers
Your TBH Mortgage Lender

[wickll]

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.

I believe this is what I did years ago when I received a truck allowance years ago. To put it simply, the money is taxable, but you can deduct your "business"miles times whatever the government rate is.

[RascalArms]

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.

This is basically the way my company did my vehicle allowance. The "allowance" itself was taxable but mileage reimbursement wasn't. I had to submit a mileage affidavit at the end of every year stating company driven miles for IRS purposes.
My regs were I had to drive a 5 year or newer vehicle with a $28k net worth when purchased new. That wag they know you are toting around clients in a decently represented vehicle versus an old 1966 Ford Pinto. 😅

[RWB]

Being that he works for the company I would just explain the upcoming home purchase and ask to delay the purchase until after closing on the house. Any reasonable manager would understand.

[Txhunter3000]

Since the responses are all over the place, if I was him I would seek a CPA's advice. Obviously too many variables to get a solid answer here.

[Tex_Cattleman]

Since the responses are all over the place, if I was him I would seek a CPA's advice. Obviously too many variables to get a solid answer here.

Agree 100% on the taxability of the allowance. Ask CPA. But not on the mortgage issue. Rely on a mortgage professional for that. Hey, that's me. See 4 posts up.

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[Southern Horns]

My allowance isn’t taxed, if it was definitely not worth it.

[S-3 Ranch]

“”They do provide an allowance of $1000/month for the vehicle/insurance””
Since it will be used for commercial purposes I bet his insurance will probably spike?
Truck note + insurance spike