Self Employed
Is Mileage Reimbursement Different For Electric Vehicles? Here’s What You Need to Know
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Summary
- If you drive an electric vehicle versus a traditional combustion engine, you do qualify for the mileage deduction as long as contemporaneous records are kept.
- Factors such as electricity consumption, rate of reimbursement, and tax guidelines influence your annual mileage deduction as an EV driver.
- Mileage reimbursement is calculated by dividing the range of the vehicle by the energy consumed in kilowatt-hours.
If you drive a personal vehicle for business purposes, chances are you log mileage for an annual tax deduction. This IRS tax break is arguably the best benefit for self-employed individuals, especially sales professionals, real estate agents, and those who classify as independent contractors. Using the IRS standard mileage rate or set rate by an employer, you can calculate your total mileage for the year and multiply it to compute your annual mileage deduction. Sounds pretty easy?! Especially if you use a mileage tracking app to automatically log your business drives each week.
But what if you drive electric?
Now that we’ve seen a significant surge in electric driving across the globe, confusion over how to deduct mileage has started to cross the minds of many drivers. At MileIQ, we frequently get asked, “Is mileage reimbursement different for electric vehicles?”. Our response — yes and no! Below we’ll break down how tracking business drives differs a bit from traditional gas-powered cars in hopes you can continue to save big on your taxes even when driving electric.
Is mileage the same for electric cars?
Technically no, mileage is not the same for electric cars as it is for gasoline-powered cars. In the context of vehicles, mileage refers to the distance a vehicle can travel on a certain amount of fuel or energy. Gasoline-powered cars typically measure mileage in terms of miles per gallon (MPG), which represents the distance the car can travel on one gallon of fuel. The MPG rating indicates the car's fuel efficiency.
On the other hand, electric cars measure their efficiency in terms of miles per kilowatt-hour (miles/kWh) or kilowatt-hours per 100 miles (kWh/100 miles). These metrics indicate the distance an electric car can travel on a certain amount of electrical energy. For example, if an electric car has an efficiency rating of 4 miles/kWh, it means that it can travel 4 miles on one kilowatt-hour of electricity.
In general, the mileage range of electric cars can vary greatly depending on factors such as battery capacity, driving conditions, speed, weather, and use of accessories like air conditioning or heating. The standard range of an electric car represents the distance it can travel on a full charge. Anything less than a full charge is determinant on the factors listed above.
In addition, the range of electric cars is typically lower than the range of gasoline-powered cars. Electric cars may require more frequent charging stops compared to refueling stops for gasoline-powered cars. However, advancements in battery technology and infrastructure are continually improving the range and charging capabilities of electric vehicles.
Bottom line: The biggest difference between the two is how you measure your distance.
How does this impact automatic mileage tracking?
Mileage reimbursement for electric vehicles (EVs) can differ from traditional gasoline-powered vehicles due to the unique characteristics of EVs. Here are a few key points to consider:
Electricity consumption
Electric vehicles use electricity as their primary source of power. When calculating mileage reimbursement for EVs, the focus shifts from fuel consumption to electricity consumption. Instead of tracking gallons of fuel, you would track kilowatt-hours (kWh) of electricity consumed.
Rate of reimbursement
The rate at which you are reimbursed for EV mileage may vary. Some organizations or employers may have specific policies for EV mileage reimbursement, while others may use standard reimbursement rates for all vehicles. It's important to check with your employer or the organization you are working for to understand their specific policies regarding EV mileage reimbursement.
Charging Costs
In addition to the distance traveled, EV mileage reimbursement may take into account the cost of charging the vehicle. Some reimbursement systems may consider the actual cost of electricity used to charge the vehicle, while others may use a standard rate per mile. Again, it's important to clarify with your employer or the organization about their reimbursement approach.
Tax Considerations
The IRS in the United States provides specific guidelines for mileage deductions and reimbursement rates for different types of vehicles, including EVs. It's important to consult with a tax professional or refer to official tax guidelines in your state to understand the specific rules and regulations related to EV mileage reimbursement and potential tax deductions.
Regional Variations
Mileage reimbursement policies can vary based on your location and the local regulations or norms. Some regions or employers may offer additional incentives or bonuses for using EVs. Not to mention, some may have specific guidelines for EV mileage reimbursement. It's important to research and understand the specific rules and incentives applicable to your region and employment terms.
As mileage reimbursement policies for EVs can vary, it's advisable to consult with your employer, refer to your organization's policies, and seek guidance from a tax professional or relevant authorities to ensure compliance and accurate reimbursement for your EV mileage to avoid misreporting.
