Mileage Allowance: IRS Rates, Reimbursements Requirements

Marin Perez

The mileage allowance is what people call the IRS standard mileage rate for a deduction. It is also often referred to as what employers will reimburse employees for business miles. These drives can be for business, medical or charity drives.    

Mileage Allowance for Self-Employed

The federal mileage rates for 2016, or what some refer to as mileage allowance this year are:  

  • 54 cents per mile for business mileage
  • 19 cents per mile for medical mileage or moving
  • 14 cents per mile for charity miles.

The mileage allowance is what some refer to as the rate at which you can take a deduction for certain types of drives. Of course, the IRS doesn't just take your word for this. You need an accurate mileage log.    

For your mileage log for a business deduction, the IRS requires a record of:  

  • your mileage
  • the dates of your business trips
  • the places you drove for business
  • the business purpose of your trips
  • total number of miles you drove during the year (business, commuting and personal).

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Unless you have an accurate mileage log, the IRS may deny your mileage deduction. Not only that, it may also impose fees or penalties if it denies your deduction.

Mileage Allowance and Mileage Reimbursement

The IRS has no specified requirements when it comes to a mileage reimbursement. You could use your personal car for work and your employer doesn't have to offer you compensation for it.    

Fortunately, many companies offer a mileage allowance or mileage reimbursement. This is likely because they want to attract and keep good workers. This doesn't always have to be a straight reimbursement for miles. It could also come in the form of a gas reimbursement or other allowance.    

The tax impact varies depending on if it's what's known as an accountable plan. An accountable plan is an expense allowance of reimbursement that follows these requirements:  

  • has a business connection
  • requires substantiation
  • excess amounts are returned in a reasonable time.

If your policy meets these conditions, you likely won't have to pay income taxes on it. You can't double-dip and take a mileage deduction for these expenses, though.    

If yours isn't part of an accountable plan, your company will include them on your W2. This means it will be subject to income taxes like you would wages. You can deduct all your business mileage at the standard mileage rate, though.

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