Which is better taking $10,000 as a car allowance or an extra $10,000 added to your base salary??

Answer 1

With the IRS standard business mileage rate for 2007 of $0.485, your $10,000 would cover 4850 annual miles. Since many jobs require at least that much in travel, it is a very reasonable amount and covers significantly more people than "no one" as stated in another post. Since you can deduct employee business travel expenses on your taxes, it would generally not make a difference whether you received a car allowance or salary increase. However, if you have a matching 401K plan or other similar items on your pay check, there could be differences. In the case of a 401K match from your employer, you would be better off taking the salary increase if that would increase the employer match amount.

Answer 2

Depends.

Would the $10,000 allowance be taxable as income? If not, take it. Getting $10K untaxed is like earning $13,000 and then getting taxed on it. Plus, you can spend that money on gas, insurance, tune-ups, car payments, parking, oil changes, car washes, etc... But, a lot depends on other factors, like how long are you thinking of staying with this company.

Which leads me to...

On the other hand, if you receive it as income, then you have a higher salary to report to the next position you go for, any raises you get would be that much higher, you have the option of putting a larger percentage into a 410(k), etc...

For example, if you make $30K with the car allowance, and get a 5% raise in a year, that is $1500. If you made $40K w/o the allowance, and get a 5% raise, you will get a raise of $2000. Does not seem like much until you do the math for ten years or so.
Year 2 with allowance, 5% raise would be $1,575 total salary $33,075;
without the allowance, year two 5% raise is $2,100 total salary $44,100.
In year 10, your salary with car allowance = $48,867
without the car allowance = $65,165

Answer 3

i think if you check the 10000 car is tax free -- even it is look before you leap and do some quick figuring if you have a 401k it might be better to put in salary -- also consider your next raise -- the car allowance will not be in the amount to be added to.. logs of things to think over.

Answer 4

In reality, they are identical. That said, no one needs $10,000 a year for a car. You can spend under $20,000 for a good used car that will meet your needs for at least 5 years.

Answer 5

I guess it depends on how much you use your car. If you use your car an excessive amount maybe take the allowance. If you do not need a car allowance because you won't need to use a car very much, take the money for your base salary.

Answer 6

Added to your base salary....it's money so you can use it for anything or save and earn interest. The car's value will only deppreciate, so you'll lose money when you want to sell it or trade it in.