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Annual Lease Value

Generally, you figure the annual lease value of an automobile as follows.

  • Determine the fair market value (FMV) of the auto mobile on the first date it is available to any employee for personal use.
  • Using the following Annual Lease Value Table, read down column (1) until you come to the dollar range within which the FMV of the automobile falls. Then read across to column (2) to find the annual lease value.
Annual Lease Value Table
(1)
Automobile FMV
  (2)
Annual
Lease
Value ($)

  $0 to 999

........................................................

600

  1,000 to 1,999

........................................................

850

  2,000 to 2,999

........................................................

1,100

  3,000 to 3,999

........................................................

1,350

  4,000 to 4,999

........................................................

1,600

  5,000 to 5,999

........................................................

1,850

  6,000 to 6,999

........................................................

2,100

  7,000 to 7,999

........................................................

2,350

  8,000 to 8,999

........................................................

2,600

  9,000 to 9,999

........................................................

2,850

 10,000 to 10,999

........................................................

3,100

 11,000 to 11,999

........................................................

3,350

 12,000 to 12,999

........................................................

3,600

 13,000 to 13,999

........................................................

3,850

 14,000 to 14,999

........................................................

4,100

 15,000 to 15,999

........................................................

4,350

 16,000 to 16,999

........................................................

4,600

 17,000 to 17,999

........................................................

4,850

 18,000 to 18,999

........................................................

5,100

 19,000 to 19,999

........................................................

5,350

 20,000 to 20,999

........................................................

5,600

 21,000 to 21,999

........................................................

5,850

 22,000 to 22,999

........................................................

6,100

 23,000 to 23,999

........................................................

6,350

 24,000 to 24,999

........................................................

6,600

 25,000 to 25,999

........................................................

6,850

 26,000 to 27,999

........................................................

7,250

 28,000 to 29,999

........................................................

7,750

 30,000 to 31,999

........................................................

8,250

 32,000 to 33,999

........................................................

8,750

 34,000 to 35,999

........................................................

9,250

 36,000 to 37,999

........................................................

9,750

 38,000 to 39,999

........................................................

10,250

 40,000 to 41,999

........................................................

10,750

 42,000 to 43,999

........................................................

11,250

 44,000 to 45,999

........................................................

11,750

 46,000 to 47,999

........................................................

12,250

 48,000 to 49,999

........................................................

12,750

 50,000 to 51,999

........................................................

13,250

 52,000 to 53,999

........................................................

13,750

 54,000 to 55,999

........................................................

14,250

 56,000 to 57,999

........................................................

14,750

 58,000 to 59,999

........................................................

15,250

For automobiles with a FMV of more than $59,999, the annual lease value equals (.25 x the FMV of the automobile) + $500.

FMV. The FMV of an automobile is the amount a person would pay to buy it from a third party in an arm's-length transaction in the area in which the automobile is bought or leased. That amount includes all purchase expenses, such as sales tax and title fees.

If you have 20 or more automobiles, see Regulations section 1.61-21(d)(5)(v). If you and the employee own or lease the automobile together, see Regulations section 1.61-21 (d)(2)(ii).

You do not have to include the value of a telephone or any specialized equipment added to, or carried in, the automobile if the equipment is necessary for your business. However, include the value of specialized equipment if the employee to whom the automobile is available uses the specialized equipment in a trade or business other than yours.

Neither the amount the employee considers to be the value of the benefit nor your cost for either buying or leasing the automobile determines its FMV. However, see Safe-harbor value, next.

Safe-harbor value. You may be able to use a safe-harbor value as the FMV. For an automobile you bought at arm's length, the safe-harbor value is your cost, including tax, title, and other purchase expenses. You cannot have been the manufacturer of the automobile.

For an automobile you lease, you can use any of the following as the safe-harbor value.

  • The manufacturer's invoice price (including options) plus 4%.
  • The manufacturer's suggested retail price minus 8% (including sales tax, title, and other expenses of purchase).
  • The retail value of the automobile reported by a nationally recognized pricing source if that retail value is reasonable for the automobile.

Items included in annual lease value table. Each annual lease value in the table includes the value of maintenance and insurance for the automobile. Do not reduce the annual lease value by the value of any of these services that you did not provide. For example, do not reduce the annual lease value by the value of a maintenance service contract or insurance you did not provide. (You can take into account the services actually provided for the automobile by using the general valuation rule discussed earlier.)

Items not included. The annual lease value does not include the value of fuel you provide to an employee for personal use, regardless of whether you provide it, reimburse its cost, or have it charged to you. You must include the value of the fuel separately in the employee's wages. You can value fuel you provided at FMV or at 5.5 cents per mile for all miles driven by the employee. However, you cannot value at 5.5 cents per mile fuel you provide for miles driven outside the United States (including its possessions and territories), Canada, and Mexico.