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What does mileage reimbursement cover?

Marin Perez

A mileage reimbursement program can be key for many businesses. But, often employees ask, "What does mileage reimbursement cover?" People who ask this question often have questions about specific expenses, like “does mileage reimbursement cover gas?” or “does mileage reimbursement cover wear and tear?” Let's go over the expenses covered, as well as some tips for a great reimbursement program.  

What's Included In The Mileage Reimbursement?

So, what does mileage reimbursement cover? 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.  

What Type of Business Travel Can I Be Reimbursed For? 

A key part of figuring out what does mileage reimbursement cover is being aware of the specific types of business travel that it includes. And the good news is that while it does not apply to every single situation, there are plenty of scenarios where your employees can claim reimbursement and be compensated. 

One example of travel that can be reimbursed is visiting customers or clients. When your employees go to meet a client or go to their home, that is the type of mileage that can be covered. 

Another example of mileage reimbursement is driving to get suppliers or run errands. It can also be applied when employees visit a temporary job site. 

When answering the question, “what does mileage reimbursement cover” you should also know that it’s possible to include expenses that are related to driving to and from business meals or entertainment. If your employees travel to seminars or even go to the airport for business travel, that is business mileage that can be reimbursed as well.

The important thing to remember is that even though there are quite a few instances where you could get reimbursed for miles, those miles need to be logged and tracked accurately in case the IRS performs an audit.

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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Automatic, accurate mileage reports.

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
  • Requires substantiation
  • The employee returns excess amounts in a reasonable time.

 If you have an accountable plan, your employees likely won't have to pay income taxes on it.  

How to Calculate Mileage Reimbursement

When you calculate mileage reimbursement for your employee travel, you need to know a few key parameters that go into the process.

First, it’s crucial to know the current standard mileage rate the IRS uses, which is now 58.5 cents per mile from 2022. You can then use this rate to multiply each mile accordingly, quickly finding the right amount and knowing exactly how much your employees should be reimbursed.

The formula to calculate mileage reimbursement looks something like this: 

Miles traveled * the current reimbursement rate

So, if your employee traveled 60 miles in 2022, you would need to multiply 60 miles with 58.5 cents, and you would get $35.10. 

But if you want to add other expenses related to travel, things can get a bit more complicated. For instance, does mileage reimbursement include tolls? Or does mileage reimbursement cover insurance? 

To answer these questions, you can cover quite a few expenses, including wear and tear, gas, taxes, insurance, tolls, and various other aspects of travel. In fact, you can even claim depreciation, which can often be the biggest expense.

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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