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How to count mileage reimbursement on a paycheck

When an employee drives their own car to see clients the company reimburses them for part of their mileage. Is it considered taxable income or a reimbursed expense?

Answers

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

The best way to reimburse is using the IRS mileage rate which is 57.5 cents per mile. That amount is considered non-taxable. Make sure you are receiving some documentation as to the miles driven, like odometer readings. If you don't have proper documentation, it can turn into taxable income.

If you don't use the IRS mileage rate, you need actual receipts for it to be non-taxable.

Question, why do you only reimburse them for a part of their mileage? If they did indeed use their own car and you are only paying them partial reimbursement, you are probably viewed as being very cheap.

By the way, if you are in fact only partially reimbursing, the employee can take the difference as a deduction on their income tax return.

Anonymous
(Controller) |

I can understand why a company would not use the IRS standard. If you have employees that only travel a few times per year, then paying 57.5 per mile is extremely high. It makes sense for those who travel a lot for work and are truly incurring wear and tear on their car because of the job. However, if it's just for the occasional off site meeting or trip to the airport, we would end up paying employees $46 for an 80 mile round trip to the airport. That's the cost of an oil change and half a tank of gas.

Anonymous
(Vice President of Operations) |

I think some things to consider - people working in States where fuel is considerably higher than other states. (California as an example) Also many people assume everyone owns a Honda Accord or a Kia so there is profit it the deal somehow. A standard american truck is about 1/3 the fuel economy compared to the vehicles above. And last time I was running a fleet, conservatively we put $2500-$3500 a year in maintenance. (tires, front end, brakes, batteries, shocks, etc) these basic maintenance items are on a timer and one day someone will have to pay them. The additional money is to offset the repairs that we all forget about. The alternative - purchase a fleet of vehicles, or have a driving service like Uber, Taxi, etc. You will pay more in the long run.

teri Gormley
Title: Travel Services Supervisor
Company: Boise State University
LinkedIn Profile
(Travel Services Supervisor, Boise State University) |

It's a reimbursed expense, not taxable income. Some organizations will deduct the normal commuter miles from the reimbursement if the employee leaves directly from home.

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