re: Is vehicle allowance considered an income?

It depends upon the amount paid and the way you report it.

If you just get a flat amount per month - with no requirement to justify anything to your employer - then it's considered an "unaccountable" plan and the amount should be part of your W-2 wages. If this occurs, then you can deduct your actual expenses - subject to business use - as an itemized deduction subject to 2 percent rules.

If you have to "account" for your vehicle use each month - by reporting it to the employer - then the amount is tax free, provided it doesn't exceed 1) per-mile federal reimbursement rates or 2) an amount determined by your employer to includes both fixed costs and variable costs. Most businesses use the IRS per mile amounts.

If you account to your employer, and they pay you an amount in excess of the IRS rate, then that excess is taxable to you, but you again may be able to claim an itemized deduction if the additional expense that you were reimbursed is legit.

In any event, unless your boss also is the controller, I would not "light up" him - this is probably coming from a beancounter of some sort!