IRS: Employer Hybrid Car Incentives Are Taxable Compensation

A number of large employers have launched programs offering employees incentives to purchase hybrid cars.

Published: 15-Jul-2006

The IRS is offering guidance to employers who give cash incentives for employees to buy hybrid cars.

The IRS says that the cash incentives are taxable compensation and employers should include the cash incentive amounts in employees' compensation reported on year-end Form W-2 earnings statements.

The cash incentives also are subject to income tax withholding and employment tax, the IRS says. The tax code provides for an exclusion from income for employee discounts only if the employer produces the product and certain other requirements are met, the IRS says.

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