As a result, the employee's earnings statement reflects additional income, tax withholdings and reduced net earnings. The additional taxable income and tax withholdings attributable to the personal use of a vehicle is also included in the employee's Form W-2. Each method has different rules prescribing when and how to use them. Consult IRS Publication 535 for specific instructions. Although these values are calibrated for an annual benefit, it is acceptable to prorate based on monthly usage.
Personal usage is based on a proration of personal miles to total miles.
The annual lease value does not include fuel, so if the employer also provides fuel, an additional amount must be added to the benefit value. The IRS defines a luxury vehicle as one with a FMV in excess of a certain amount which is indexed annually.