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. This article will dive into what’s required for a mileage reimbursement, as well as how to calculate what you deserve.
How to calculate mileage reimbursement
It’s relatively simple to calculate mileage reimbursement. Multiply the number of business miles driven by the reimbursement rate. Something like a mileage-tracking app will help you keep track of your drives.
If you drove 1,000 miles and get reimbursed .50 cents per mile, your reimbursement would be $500 (1,000 X .50 = 500). By the way, this simple formula can be tweaked based on your driving and rate of reimbursement.
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 a spreadsheet, 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 automatically tracks and logs employee mileage, while also providing seamless reporting.
What is the mileage reimbursement rate?
There’s no required federal reimbursement rate but many companies reimburse at the standard mileage rate. For 2018, that’s 54.5 cents per business mile.
How to calculate mileage reimbursement: What records you need
While the calculation is simple, the records you need to prove it often aren’t. Check with your employer on what’s needed but most require:
- Your mileage
- The date of the drive
- The place you drove for business
- The business reason for your trips.
Employers tend to like this included in a monthly expense report. This means it’s better if your mileage log is created in a timely manner.
Without detailed mileage log reports, your mileage reimbursement may be denied. Even more, some employers may even accuse you of fraud if you don’t have supporting documentation for your mileage.
How much should I be reimbursed for mileage?
It depends. There’s no federal law saying you have to be reimbursed for mileage. But, many companies peg their reimbursements to the standard mileage rate. For 2018, that means 54.5 cents per business mile.
What the IRS requires for mileage reimbursement
The IRS does not force employers to reimburse employees for using their cars for work. On the other hand, an employer could offer nothing in the form of reimbursement and it’s completely legal.
Of course, many businesses offer reimbursements because it’s a good way to attract and retain talent. Common reimbursable expenses could be a gas allowance, a mileage reimbursement, a company 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.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.