Manage my business

Does mileage reimbursement get taxed?

If you get or pay out mileage reimbursements, you likely receive questions about taxes. Let’s dive into if a mileage reimbursement is taxable income.

Is mileage reimbursement taxable?

Employees don’t have to pay taxes on mileage reimbursements with an accountable plan. An accountable plan includes expense allowances that have these requirements:

  • Has business connections
  • Requires substantiation
  • You return excess amounts in a reasonable time

Does a company have to use the standard mileage rate for reimbursement?

No. There is no federal law setting a mileage reimbursement rate. California and Massachusetts do have laws meaning you must offer a reimbursement. Also, many businesses use the standard mileage rate to set their reimbursement amounts.

Can you claim a deduction if you don’t receive a reimbursement?

For the 2017 tax returns, yes. You can claim un-reimbursed expenses like mileage on your taxes. But, this only applies if you itemize your deductions and the total amount exceeds 2 percent of your Adjusted Gross Income.

Starting with the 2018 tax year, this deduction is going away. If you drive a personal vehicle for business reasons, you may want to consider talking with your employers about a direct reimbursement or allowance.

How should you track mileage for reimbursement?

A solution like MileIQ for Teams is an ideal way for businesses to handle mileage reimbursement programs. It uses automatic mileage tracking and standardized digital reports. This leads to:

  • Cost Savings: Employees are reimbursed accurately for their mileage.
  • Increased Productivity: Mobile workers are focusing on their jobs, not logging miles
  • Improved Compliance: Standardized records stand up to IRS and financial scrutiny

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Business Insights and Ideas does not constitute professional tax or financial advice. You should contact your own tax or financial professional to discuss your situation.