Question: I work for a florist and often use my personal vehicle to deliver flowers for events like weddings, birthdays and funerals. The shop I work for reimburses my mileage at 45 cents per mile. Can I take a mileage deduction on top of my partial mileage reimbursement?
Stephen Fishman: You cannot deduct the 45 cents per mile that your employer reimburses you for your mileage. This deduction belongs to your employer, not you. You need not include the amount of these reimbursements in your income provided that you properly document your mileage for which you’re reimbursed.
The IRS does not mandate how much employers must reimburse their employees for their mileage, if they elect to do so. Such reimbursement can be full or partial, as calculated by using either the IRS standard mileage rate or a fixed and variable rate (an allowance combining a cents-per-mile rate with a flat amount).
The current standard mileage rate for 2022 is 58.5 cents per mile. Thus, your reimbursement of 45 cents per mile is partial, not full. You may deduct the remaining 13.5 cents per mile as an unreimbursed employee business expense.
However, this deduction is limited because it is a miscellaneous itemized deduction. You can deduct it only if you itemize your personal deductions on IRS Schedule A. If you do itemize, you may deduct your unreimbursed business mileage expenses only if, and to the extent, that they, along with your other miscellaneous itemized deductions (if any), exceed 2% of your adjusted gross income.
Miscellaneous itemized deductions include amounts you spent during the year for all your unreimbursed employee expenses (including business mileage), investment expenses, tax preparation fees, and hobby expenses (up to hobby income).
Question: I work for a consultancy training program, and my employer doesn’t provide me with a company vehicle. Instead, I use my personal vehicle to visit our clients outside of the office. However, my employer only provides me with a partial reimbursement. How does this work, and will it leave me out of pocket?
Stephen Fishman: Since the IRS does not mandate how much employers must fund their employees for mileage, many employees are content with only partial reimbursement. In some cases, this may be far below the new 2022 standard mileage rate of 58.5 cents per mile. Many business reimbursement programs choose to fully reimburse their employees, and thus claim the full mileage deduction as a business expense, or they may opt for partial reimbursement.
Unreimbursed employee expenses mileage allows you to take a tax deduction on the difference between what your department reimbursed you for and the amount outstanding. In short, you will never be left out of pocket in the eyes of the IRS simply because you use your personal property for business purposes.
Question: I work for a security firm and I’m about to file my taxes for the 2021 tax year, but I’m confused about unreimbursed mileage. How does mileage reimbursement work with taxes?
Stephen Fishman: Including a partial reimbursement of mileage on a tax return is not always straightforward if this is your first time. The unreimbursed mileage tax deduction ensures you receive what you are entitled to in the form of a lower tax bill. Firstly, you cannot double-dip on mileage. You may only claim for unreimbursed mileage if you received a partial reimbursement or no reimbursement at all.
For making your claim, you will need to complete Form 2106, under the title Section II Part A, where you will report your total registered mileage for the year. Find your completed mileage driven for commuting, business, and personal matters. You can submit your deduction using either the standard mileage rate, which is currently 58.5 cents per mile, or actual vehicle expenses. Calculate your potential deduction both ways to decide which one will give you the biggest number for total car expenses. Part B is for the standard rate, and Part C is for actual vehicle expenses.
Start by adding mileage expenses on Line 1 of Part 1. Enter any other required expenses on Line 2 to Line 6. These include additional employee care expenses, such as meals, hotels, and food. Copy received employer reimbursement on Line 7. Make sure you include all forms of reimbursement, rather than just your partial reimbursement for mileage.
Subtract received payment for non-meal expenses and add it to Column A, Lines 8 and 9. For meals, you will need to include the meal portion of your expenses on Line 8. Multiply that figure by 0.5 and add the final figure on Line 9. The total deduction that you were not reimbursed for will appear on Line 10. Sign off your tax deduction request by adding the final amount on Schedule A, Line 21.
This really is not as complex as it sounds. Many free tax filing services will even fill out all the forms for you. All you need are the basic figures. Access them with the Mile IQ service and take advantage of a helpful platform for tracking your future business expenses on the open road.
Each week, our resident small business tax expert, Stephen Fishman, answers your small business tax questions.