Taxes

How to Calculate Mileage Reimbursement & IRS Rules | MileIQ

Marin Perez

Updated: Jan. 2, 2019  If you're an employee who uses your personal car for business reasons, you may be eligible for a mileage reimbursement. Sometimes, it's not clear how to calculate mileage reimbursement.

What is mileage reimbursement and what is the business mileage rate 2021 stipulation?

This article will answer those questions and dive into what's required for a employee mileage reimbursement, as well as how to calculate what you deserve.

How to calculate mileage reimbursement

Calculating mileage reimbursement is relatively simple. To find your reimbursement, multiply the number of business miles driven by the IRS reimbursement rate. So if you drove 1,000 miles and got reimbursed .56 cents per mile, your reimbursement would be $560 (1,000 miles X $0.56 = $560).

How do companies calculate mileage reimbursements?

Companies typically use a car allowance or per-mile reimbursement. An allowance is a set fee per month to employees. The reimbursement involves paying an agreed-upon fee per mile.  For mileage reimbursements, many businesses still rely on manual mileage logs. That means employees write down their mileage, input it in spreadsheet forms, then include that information during their monthly expense report. This process is ripe for mileage inflation and inefficiencies.  Modern companies are leaning toward solutions like MileIQ for Teams. This service app automatically tracks and logs employee mileage, while also providing seamless reporting.

What is the mileage reimbursement rate?

There's no required state or federal reimbursement rate but many companies reimburse at the standard mileage rate. Mileage reimbursement in 2021 is set at 56 cents per business mile.

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How to calculate employee mileage reimbursement: What records you need

While the financial calculation is simple, the records you need to prove a claim often aren't. Check with your employer on what's needed but most require:

     
  • Your mileage
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  • The date of the drive
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  • The place you drove for business
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  • The business reason for your trips.

Employers tend to like this included in a monthly expense report to calculate mileage reimbursement. This means it's better if your mileage log is created in a timely manner.  Without detailed mileage log reports, your mileage reimbursement may lead to internal questions or even be denied. Even more, some employers may even accuse you of fraud if you don't have supporting documentation for your mileage reimbursement.

How much should I be reimbursed for mileage in 2021?

It depends. There's no federal law saying you have to be reimbursed for company mileage. But, many companies peg their mileage calculator reimbursement rates to the standard mileage rate. For 2021, that’s 56 cents per business mile.

What the IRS requires for business mileage reimbursement?

There are no IRS mileage reimbursement rules requiring employers to reimburse employees for using their personal cars for work. This means that an employer could offer nothing in the form of reimbursement and it's completely legal.  Of course, many businesses offer reimbursement of costs because it's a good way to attract and retain talent. Common reimbursable expenses could be a gas allowance, a company vehicle car or more.

Can I take a mileage deduction if get a mileage reimbursement?

No. The new tax laws removed deductions for unreimbursed business expenses like mileage.

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