Small Business Tips

What expenses does mileage reimbursement cover?

Marin Perez

A mileage reimbursement program can be key for many businesses. But, often employees ask, "What expenses does a mileage reimbursement cover?" Let's go over that, as well as some tips for a great reimbursement program.  

What's Included In The Mileage Reimbursement?

 The mileage reimbursement covers the cost of operating a personal vehicle for business reasons. This includes the cost of things like gasoline, oil, maintenance and wear-and-tear.    Your business can decide how to handle other driving-related expenses. This may include the costs of parking and tolls.  

How Much Do Employers Have To Reimburse For Mileage?

 There's no mileage reimbursement law that forces businesses to pay employees for driving. But, California and Massachusetts have rules which require a mileage reimbursement. There are also labor laws which may force businesses to reimburse some drives.    Employers will offer a mileage reimbursement to attract and retain workers. It's easiest to peg the rate to the standard mileage rate of 53.5 cents per business mile in 2017. But, the government doesn't require this.    If employees are reimbursed less than that rate, they may deduct the difference. This applies if they itemize their deductions and it exceeds 2 percent of their AGI.  

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What's The Difference Between A Mileage Reimbursement, Deduction?

 The mileage deduction is an expense write-off for business use of a personal car. You can reduce your taxes as long as you're keeping proper track of your mileage. It's often associated with the self-employed. The mileage reimbursement comes from an employer for miles driven for work.  

Is Mileage Reimbursement Taxable Income?

 If you have an accountable plan, no. An accountable plan is an expense allowance of reimbursement that follows these rules:  

       
  • Has a business connection
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  • Requires substantiation
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  • The employee returns excess amounts in a reasonable time.
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 If you have an accountable plan, your employees likely won't have to pay income taxes on it.  

How To Track Mileage For Reimbursements

 The best mileage reimbursement program relies on automatic mileage tracking and includes standard, digital reporting. This removes the temptation for employees to pad mileage on their expense reports. It also saves time, money and promotes compliance. Solutions like MileIQ for Teams put it all together for you.  

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