Hi,
I am receiving a car allowance from the company and I always thought the whole amount would be non-taxable. Because it was written on my payslip as 'Car Allowance-Taxed'. But during this tax time, I found that a vehicle allowance was also included in my taxable income. Could anyone please explain why is that?
Hello @gch015,
I can explain that for you.
Many people believe that car allowances are not taxable and this is a common misconception. Car allowances are considered taxable income.
However, the amount of tax you pay on your allowance depends on how much you used for work related purposes.
The way that it works is you declare your car allowance as income on your tax return, and you claim a deduction for the portion you used for work purposes.
For example if you used 100% for work related purposes, 100% of the allowance is tax deductable.
You only end up paying tax on the portion of the allowance you did not use for work related purposes.
Hello @gch015,
I can explain that for you.
Many people believe that car allowances are not taxable and this is a common misconception. Car allowances are considered taxable income.
However, the amount of tax you pay on your allowance depends on how much you used for work related purposes.
The way that it works is you declare your car allowance as income on your tax return, and you claim a deduction for the portion you used for work purposes.
For example if you used 100% for work related purposes, 100% of the allowance is tax deductable.
You only end up paying tax on the portion of the allowance you did not use for work related purposes.
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