I have a similar scenario where I can choose the allowance or go with a company car. I only receive $600 a month and it is taxable income. However, when I went to do my taxes and itemize, I am able to deduct the mileage x 48 cents for 2007 (I think that was the number my accountant used). Here was the approximate math. 25K miles X .48 = about $12500 deduction. I was in the 25% tax bracket, so that helpd me save $3125 ($12500 x 25%). My allowance = $7200 a year at the 25% bracket means I net $5400 . When I added together I get $5400 + the $3125 that my deduction actually means to me = about $8500/year = $700 month. I don't know if I actually come out ahead b/c I have to pay insurance, but $700 net a month on a car seemed pretty good to me. I now have an SUV that has a 3rd row. If I had to go with a company car, we most likely would have purchased a larger vehicle to have for a family car. Therefore, I killed two birds with one stone. I bought a few year old used SUV and paid $19000 for it. $8500 x 3 years = $25,500. Even with insurance and any maintainance, I feel good that I will pay for the car in that time. Plus, it's not as if the car won't be worth a few grand in 3 years, even with the miles. Lastly, I have had a company car for 10 years and was tired of a taupe Tauras!
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