Auto Allowance Cost
Allowable or Unallowable: Unallowable, Allowable
Source: Federal Acquisition Regulation (FAR)
FAR 31.205-46 Travel Costs states,
"Costs of contractor-owned or -leased automobiles", as used in this paragraph, include the costs of lease, operation (including personnel), maintenance, depreciation, insurance, etc. These costs are allowable, if reasonable, to the extent that the automobiles are used for company business. That portion of the cost of company-furnished automobiles that relates to personal use by employees (including transportation to and from work) is compensation for personal services and is unallowable as stated in 31.205-6 Compensation for personal services(m)(2), which states,
" That portion of the cost of company-furnished automobiles that relates to personal use by employees (including transportation to and from work) is unallowable regardless of whether the cost is reported as taxable income to the employees (see 31.205-46(d))."[1]
Allowable
Costs of rental cars, leased cars, or personal cars, for employees while on "business travel."
The contractor has the burden of showing proof that the purpose of the trip was allowable, and needs to document the following: 1. Purpose of Trip
2. Name of Person(s) on trip, their title, and relationship to the company
3. Date and place of the trip
4. Reasonableness of the trip
Unallowable
1. Cost incurred as a result of a trip that has been determined to be an unallowable activity.
2. Personal commuting expenses
Business Use of Your Car[2]
Allowability of car expenses for US Government contract purposes, follows IRS guidelines. They are:
"If you use your car exclusively in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Generally, commuting expenses between your home and your business location, within the area of your tax home, are not deductible".
What this means is an individual must keep a log of actual miles driven, and the purpose that those miles were driven.