Our annual survey results have arrived, and they reveal negative impacts of the tax reform on employees who receive a car allowance or vehicle reimbursement. As a result, 9 out of 10 companies surveyed have made or are considering making policy changes. Let's look at the reasons why.
A lost tax deduction's impact on car allowances in 2019
The 2017 tax cuts eliminated the unreimbursed business expense tax deduction. Before the spring of 2019, employees who received a car allowance could write off business mileage using the IRS mileage rate. Employees who received a mileage reimbursement could write off any vehicle expenses not covered by their reimbursement.
For the first time, we surveyed both HR managers and employees who drive for their companies, and not just managers. The results from both sets of respondents produced a startling corroboration.
Without this popular tax deduction, 61% percent of drivers reported a loss of income. Of the managers, 62% reported hearing complaints about the company's car allowance or vehicle reimbursement. Employers nationwide need to take note of this situation and act accordingly.
Benchmarking your 2020 car allowance after tax reform
With a majority of mobile employees experiencing an income loss due to changes in the tax code, employers are having to making changes in order to stay competitive. Our 2019 car allowance results can help companies benchmark their current allowance or reimbursement policy against the trends.
With 9 out of 10 organizations looking to make changes in response to the tax code changes, and a majority of mobile employees looking for better vehicle benefits, now is the time to make changes.
Downloading our survey results will equip you with important data to guide your decision-making in preparation for 2020. This survey report contains further details on the following topics:
- Percentage of organizations that offer a taxable car allowance
- Car allowance amounts reported by participating organizations
- How organizations chose their car allowance amount or mileage rate
- Importance of a car allowance or vehicle reimbursement to job seekers
- Sizes and industries represented by participating organizations
- Roles played by employees receiving an allowance or reimbursement
- Average mileage amounts accrued by mobile employees annually
- Attitudes of employees toward mileage tracking for reimbursement
What's a competitive car allowance for 2020?
Based on our survey results, a competitive car allowance or reimbursement will resolve the concerns of the 61% of employees who experienced a shortfall in 2019. How you get there may differ from company to company, but there are a number of best practices you can follow.
1. Avoid a one-size-fits-all plan.
Most organizations pay either a flat monthly car allowance or a mileage reimbursement rate that's the same for all employees. The problem is, not all employees experience the same kinds of vehicle costs. Different territory sizes and different geographic cost factors can yield widely different results. Our 2019 Car Allowance Survey report includes information on a plan that can provide customized reimbursements.
2. Go with a non-taxable car allowance.
Employees lost a helpful tax deduction. They will need a boost in 2020 to compensate. That boost could get costly to the company, but by cutting Uncle Sam out of the loop, the company often can use the savings to fund a more robust vehicle program. Our 2019 Car Allowance Survey report includes helpful information on three different non-taxable plans to consider.
3. Use expense data to determine your rate.
When you read our full report, you'll find that most organizations do not rely on vehicle expense data to derive their car allowance or reimbursement rate. We believe this is one of the reasons so many employees find their current amount insufficient. With many states tightening up their labor codes, we expect to see more employers under pressure to defend their current rate. After reading the survey results, we recommend that you use our 3-Step Rate Development Process to prepare for 2020.