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Does Mileage Reimbursement Get Taxed?

Linzi Martin

As mileage professionals, we constantly get asked what items fall under taxable income. And our answer to that question is often the same — it depends! When an employee drives a personal vehicle for work, a company will typically reimburse them for auto-related expenses. This is commonly known as mileage reimbursement. But what stumps a number of employees is whether mileage reimbursement counts as taxable income. That is why we’ve clarified any misunderstandings of the IRS mileage reimbursement rules below.

Is mileage reimbursement taxable income?

Employees who are given mileage reimbursement should know generally it is not taxable income. This remains the case as long as the amount does not exceed the IRS mileage rate for a given year. In 2022, for example, the IRS standard mileage rate is 58.5 cents per business mile. If your mileage reimbursement exceeds the IRS rate, the difference is considered taxable income. Comparably, if your employer uses the IRS rate but does not keep accurate records of the business use of your vehicle, then the reimbursement requires taxation. Bottom line: mileage reimbursement must be accountable to remain non-taxed.

How does mileage reimbursement work with taxes?

Mileage reimbursement is made possible with an IRS-approved accountable plan. Essentially, the accountable plan is a set of standards for handling your reimbursements or allowances for employees. In order for mileage reimbursement to be distributed, the accountable plan must satisfy the following requirements:

  • There’s an established business connection
  • Employees provide some form of substantiation for any fees or expenses
  • Employees must return excess amounts in reasonable period of time

Granted you’re an employer who permits the use of personal vehicles for business reasons, mileage reimbursement is crucial. This refunded amount will cover yearly fuel, maintenance, and depreciation costs for your employees. Therefore, whether you have a small team or keep growing by the numbers, it’s important to properly track mileage for reimbursement purposes.

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Automatic, accurate mileage reports.

What’s the best way to track mileage for reimbursement?

While traditional mileage tracking once required the use of pen and paper, nowadays there are more efficient ways to keep track of employee mileage. One of the best approaches is automatic mileage tracking for reimbursement. All you need is a mobile device and a highly-rated mileage tracking app. With the ease and accuracy of MileIQ, department heads can guarantee that all employees are appropriately reimbursed for business miles throughout the year.

How can MileIQ for Teams help businesses track mileage

Navigating mileage reimbursement programs for your business is not an easy task. Luckily, MileIQ found a simple solution for businesses of all kinds and sizes. With MileIQ for Teams, you can automatically track employees’ mileage and get standardized digital reports on all accumulated expenses. Additionally, our comprehensive system reduces your need for paperwork or spreadsheets. Instead, you can improve your regulatory compliance by focusing on more pressing tasks at hand. Our case studies are proof enough that your business will run more efficiently with MileIQ’s help.

Want to learn more about improving your business operations? Here are 5 tips for making employee scheduling easy.

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