IRS Mileage Reimbursement: Reimbursement Rules & Tips

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IRS Mileage Reimbursement: Reimbursement Rules & Tips

We often talk about tracking mileage so independent contractors can take a tax deduction. Yet, a tax deduction isn’t the only reason to track mileage if you drive for work. Many employee are also eligible for a mileage reimbursement via expense reports. These workers should also track their miles.

Federal Mileage Reimbursement Laws

We’ll dive into the specifics below but some key takeaways are:

  • There’s no federal rule for private businesses to reimburse use of a personal vehicle for work purposes
  • If you don’t receive a mileage reimbursement, you may claim a deduction for the business mileage
  • If your reimbursement doesn’t equal the standard mileage rate, you may claim a partial deduction
  • You likely don’t have to pay income taxes on your reimbursement if it’s part of an accountable plan
  • If you receive a tax-free mileage reimbursement, you can’t claim a mileage deduction
  • If it’s not an accountable plan, your mileage reimbursement can count as taxable wages—You’ll be able to claim a deduction in this scenario.

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Is An Employer Required to Pay Mileage Reimbursement

There’s no required mileage reimbursement rate companies have to pay. That’s right, the IRS hasn’t set any official mileage reimbursement rules.

Yet, some states do have a mileage reimbursement rate requirement. Also, many businesses decide to peg this rate at the standard mileage rate but they don’t have to.

If you don’t get this rate for your reimbursement, you may still be eligible for a deduction. This would be the partial mileage deduction.

Mileage Reimbursement Versus Deduction

Let’s clear up some of the terms before we dive into the importance of tracking your drives.

The mileage deduction is about the miles you can deduct on an itemized tax returns at the end of the year. Each year, the IRS sets the rate each mile driven for work is worth. The 2017 standard mileage rate set by the IRS is 53.5 cents per mile for business drives. You can see how someone who drives a lot for work can earn a pretty hefty deduction.

The mileage reimbursement allows you to add the miles they drive to an expense report. Companies reimburse these people for these miles. These employees can’t take a tax deduction on their miles because they’re already reimbursed. The IRS doesn’t allow people to “double-dip.”

But wait—there is an exception to this rule!

You can take a partial deduction if your company doesn’t use the standard mileage rate. You can claim the difference between your mileage reimbursement and the IRS rate.

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Is Mileage Reimbursement Taxable Income?

If you use a personal vehicle for business purposes and get a mileage reimbursement, that may impact your taxable income. 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 mileage allowance 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.

IRS Gas Mileage Reimbursement Rate

There is no standard reimbursement rate, as companies can set their own rate. Some companies will even offer various ways to “pay for” employee mileage. This can include providing work cars or offering a gas allowance. This can also include a reimbursement for company mileage. As mentioned above, many companies peg the reimbursement rate to the rate set by the IRS.

Example of Partial Mileage Reimbursement

Nancy is a pizza delivery driver for Pepperoni Pete’s Pizza Pies. Nancy gets a reimbursement of 35.5 cents for every mile she drives delivering pizza. The difference between the reimbursement and the IRS rate is 18.5 cents per mile.

If Nancy drives 10,000 miles in 2016, she’ll receive a reimbursement of $3,550. She can also take a tax deduction of $1,850 on her taxes. She can only do this if she’s remembered to track her mileage.

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Reimbursement Expense Reports: How to Calculate Mileage Reimbursement

Most employees have to submit some sort of mileage log if they want to get money for company mileage. This is often included in their  expense report.

The specificity of the milage log may vary by company, though. Some organizations may only need employees to submit mileage for each work trip. Other companies, especially publicly-traded ones, need stringent record keeping. This may include the reason for the trip, client names and even the make and model of the vehicle.

If you plan to take this reimbursement, you should have detailed mileage logs. If you don’t keep detailed records, your expense report may get rejected. Even worse, your employer could even take disciplinary actions if it suspects fraudulent claims.

Tracking Drives for Miles Reimbursement

Employees have many options for tracking mileage for their mileage reimbursement:

Not Doing It

Sadly, the most common method is not to do it. Employees often feel that the records needed are more effort than they’re worth. This hassle means many don’t include a mileage reimbursement in their expense reports. At 54 cents per mile in 2016, this is a huge mistake and can add up to thousands of dollars per year.

Calendar and Maps

Another common method is going back through their calendars and calculating the distance. While this method is better than doing nothing, it still poses a few problems.

Many employers are like the IRS: they need contemporaneous record keeping. Estimating your mileage may be in violation of an employer’s policies.

Just as important, going back and estimating is time-consuming and inefficient. It takes a lot of time to comb through calendar entries and lookup the mileage for every meeting. It’s no wonder many employees don’t think the time investment is worth it.

Pen and Paper

Many employees keep a notebook in their cars and note the mileage each time they drive for work. This method is time-consuming and easy to forget. This often leads to lackadaisical record keeping and missed miles. Employees are likely to record the longer drives they make. But they often won’t bother with drives of a few miles here or there. Yet, these small drives can add up to significant reimbursement over time.

Automated Mileage Tracking

mileage tracking app like MileIQ is the easiest way to ensure you’re tracking your drives. This automatically tracks your miles and ensures you keep an accurate mileage log for a mileage reimbursement.

Additionally, you can easily print or download a report of all your business drives. These reports include mileage, vehicles, business reasons for drives, notes to include and more. This can help save many hours per week in record keeping. It also helps to ensure you’ll never have a reimbursement for company mileage denied for inadequate data.

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Joshua Brost

Joshua Brost

Joshua Brost handles the content and communication at MileIQ. When he's not busy talking to reporters and bloggers, he can usually be found plotting how he's going to survive the zombie apocalypse, cooking something fancy or cursing at a new gadget that's not working the way he intended.
Joshua Brost

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MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.

  • TP Smith

    Question: do you know how an un-taxed vehicle allowance would factor in?


    • Joshua Brost

      Hi TP. As always, I’d say check with your accountant. However, I think this really depends how you’re getting the allowance. Is it a flat rate each month? Is it based on the miles you drive? Feel free to submit your question to our tax expert here:

      • TP Smith

        Hi Joshua, thanks for the quick reply – I just downloaded the MileIQ app – and sent a message to your tax expert about that to be safe.

        But, yes, it is a flat-rate each month to cover any expenses including mileage/repairs/etc.

        My other question was: on the Mile IQ website, I read that the “The IRS also wants to know the total number of miles you drove during the year for business, commuting, and personal driving other than commuting.” So do I need to track and report location and purpose of EVERY mile I put on my car? (not just for work, but also commuting AND personal use of my vehicle?) I understand having to log and report the drives used for business, but it seems a bit overwhelming,cumbersome and almost invasive to list every single place I go and why in my personal life..

        Look forward to hearing back from you! Just want to make sure I’m making well informed decisions so that tax season goes smooth next year..

        • Joshua Brost

          Hi again, TP. Glad you submitted your question. Stephen should be able to give you a more detailed answer than I can.

          As to your other question, yes! You are supposed to track all of your drives, and then just deduct the business drives. That’s why MileIQ tracks all of your drives, then let’s you classify them as business and personal. In the event your mileage deduction gets audited, you’ll then have a complete mileage log to backup your deduction. If you haven’t already, be sure to read about Mileage Logs the IRS and Tax Court Didn’t accept (

          • TP Smith

            Thanks Joshua, I’m up and running with the unlimited drive package of MileIQ. Just one last question: For “personal drives” is simply marking them as “personal drives” sufficient, or do I need to enter specific notes (like on “business drives”) ?
            For example, to go to the Grocery Store, do I need to enter “personal drive” and then “reason for personal drive: drive to grocery store” or is simply tagging it as a personal drive enough for tax purposes?

            Thanks again for all of your help. There are a lot of options out there for apps, but I’d definitely recommend you guys to others looking for an app- as your app is simple/user-friendly, your site has lots of helpful information, and you have been very helpful as well!

          • Joshua Brost

            Great news! I think you’ll find MileIQ pays for itself very quickly! No need to make a bunch of notes on the personal drives. Just classifying them as personal should be plenty. Just be sure to make the necessary notes on the business drives. Also, be sure to check out the web dashboard to set up custom categories, bulk classify drives, join drives, etc…

  • nan

    i work for a company that each day i go to a different stores sometime 4 in one day i of them is 60 miles round trip when do i start my mileage when i leave home or when i get to my 1st stop they are asking me to travel to these store

    • Joshua Brost

      Hi Nan-

      Normal disclosure: Always check with your Accountant (or in the case of reimbursement your HR department) to be sure about the specifics of your situation.

      From what I understand, you would deduct the trip from whichever store is considered your principal place of employment or “home store.” If you have a home office, that’s a different story, at least as far as the IRS is concerned. If you have a qualifying home office, you can deduct the drives right when you leave the house. Just a note: if you’re being reimbursed by an employer, they may have different internal policies than does the IRS – so it’s important to check with your HR team.

  • tada

    I’m an employer. If my employees are submitting their miles and where they traveled to for business, am I also supposed to require them to give me their odometer readings along with their personal miles in order to have enough support in case of an IRS audit? I read somewhere else on MILE IQ that personal miles is also required by the IRS. I reimburse per mile. Is just business destination, date and miles traveled enough?

    • Joshua Brost

      That’s a great question. I think the way you’d claim the deduction as an employer is slightly different as is the documentation required. I’d suggest submitting this to our tax expert just to be sure. You can do that here:

      As far as your employees using MileIQ: When they run their monthly reports, they could choose to only include their business miles in what they submit to you. That way you have a detailed log to justify their reimbursement and they don’t have to provide you a log of their personal drives. It’s a win-win!

  • Paula Enderle

    My employer for the last 10 years has paid mileage of .30 per mile and then adds it to my wages and has taxes taken out of it…it doesn’t seem fair to me.

    • Joshua Brost

      Hi, Paula- This is something you should talk to your tax preparer about for sure

  • Lisa Fields

    The article states you can “easily print or download a report of all your business drives.” Do you have an example of what that report would look like from MileIQ? I am a controller in a corporation. I would like to recommend MileIQ for our employees. A report would need to be attached to an expense report to claim mileage reimbursement. We do not use an expense report system that MileIQ integrates with. TIA

    • Joshua Brost

      Hi, Lisa. Can you shoot us an email at We can send you over some examples.

  • Sandii Chase

    How do I record the literal starting and stopping miles at each job? I don’t see anywhere on the app that allows us to enter a starting mileage from the odometer and the ending mileage as well. Thanks, in advance!

  • Theresa Lavagnino

    Hi, Joshua, I’m a mom that easily racks up 300-400 mi. a week driving my daughter to & from her job. Do I qualify for MileiQ as I have already started documenting manually info.&, if so, would I need to print off some kind of expense sheet /report

    • Marin

      It doesn’t sound like you could qualify for a mileage deduction, unless you’re in business with your daughter. With that said, I’m not a tax expert—luckily, we do have one who loves to answer questions like there, so please ask here:

      • Theresa Lavagnino

        Thank you, Marin, I will do that.

  • Carolyn

    I do a lot of volunteer work and have been using mile IQ to track my mileage. I’m confused about what the deduction actually means. If I claim 10,000 miles at 14 cents per mile, that comes to $1400. Does that mean I should be refunded the full $1400 on my tax return?

    • Marin

      Hi Carolyn,

      As always, please consult a tax professional before making any official filing. With that said, if you’re working with a qualified charity, you can deduct 14 cents per mile. For your case, you’d file a $1400 deduction from your taxable income. Hope this helps and best of luck!

  • Barbara

    My employer deducts 40 miles from mileage off the top and then pays .54 cents mile for the remainder Example total Round trip 160 miles subtract 40 Pay on 120 Is it legal for them to deduct 40 miles per round trip? They deduct it on each individual round trip pet location I travel to This makes it so they actually pay less mileage doing it per trip

    • Marin

      Barbara, I’ve submitted your question to our tax expert and will let you know what he says.

  • peter

    I am driving approximately 100 miles round trip to survey a client’s new building. I normally fly so i not familiar with how employees are able to expense this. I was given the option to use my own vehicle or rent a car. sense it is so close it would cost them more for me to rent a car. I am told i will be reimbursed at $0.54/ mile. They are saying gas is included in that. i was under the impression that gas would be separate from the mileage reimbursement. Is that correct or am i misinformed?

    • Marin

      Hi Peter,
      Normal disclaimer: I’m not an expert so consult with your tax pro. With that said, there’s no set standard for what employers have to reimburse employees. Many peg it to the standard mileage rate (54 cents per miles) because it’s easier to keep track of. For what it’s worth, the standard mileage rate does factor in gas costs. So, your employer doesn’t have to separate gas from the mileage reimbursement.

      Hope this helps.

  • nadia rubin LMT

    Hi, I’m a self employer and every day I drive from my Home Office to my Office and return. Sometimes twice. My question is, if during my drive I stop somewhere for another reason, like grocery shopping, or gas, then I will have 2 drives instead of one (straight to work) so how do I record those drive? Personal or Business?

    • Marin

      Hi there, sorry for the delay. I’m not a tax expert so you’ll want to discuss with one before making any decisions. With that said, the research I’ve done suggests that personal stops between business drives don’t disqualify the entire drive. So, if your business trip would normally take 15 miles but in between, you do a personal stop that adds 5 miles, you can still count the 15 mile trip as a business drive.

  • buz

    hi I work for a company that provides a company for me and charges me for personal use, my issue is that the amount they charge me they add to my salary first then deduct the same amount after taxes. so I am taxed on a higher salary than I am getting. Is there any way to get a deduction on my taxes for this?

    • Marin

      I’ll pass this along to our tax expert and see what he says.

  • Shadowwraith

    I work with labor ready which is a temporary employment agency. They pay us as an employee, but do not reimburse us for anything. When I keep track of my mileage and went to the local h&r block to do my taxes, they suggested to use a standardized deduction instead of the itemized deductions. Well either way I go, it seems like there is no reimbursement for all those miles I drove, as the refund amount was no better than had I went without any kind of deductions and simply filed my own 1040ez. I clocked over $4600 in mileage and this doesn’t even include my moving expenses, yet looking at the way deductions are handled for someone that is single with no dependants, it seems like it’s worthless to even track miles, as I am basically being reimbursed nothing it seems.

  • Stella

    Quick Question. I know I can submit my miles when I go to an offsite meeting from my office. My question is am I able to submit my miles from the meeting back to my home if I go straight home?


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