Not sure how much information is needed, but let’s say something comes up that requires substantial driving which the employee is willing to do with their personal car.
Beyond their wage what do you think is a reasonable approach to compensating them for the use of their car? Specifically due to depreciation, wear and tear.
If it makes a difference I’m interested in the theoretical approach rather than what I can get away with or something like that.
Here’s a link to the IRS website describing reimbursement for this very thing. It’s a per mile reimbursement.
how is this documented so they aren’t taxed? or should this be taxed as income?
It’s a business expense. One way of handling this is to have them file an expense reimbursement form and write them a check for the expenses. Pay them for these expenses like you would a vendor rather than on payroll.