Mileage reimbursement is intended to cover all the costs associated with operating a vehicle for business purposes, including wear and tear on the car as well as gas costs.
If you need to reimburse employees for mileage, try our free calculator.
Employers who reimburse mileage, should not also reimburse for gas or for oil changes. Mileage reimbursement should cover all of those expenses.
Of course, an employer can reimburse whatever he or she chooses and if this just covers the cost of gas, that is fine (in most states). If an employer does not reimburse the full IRS rate, then employees can deduct that portion from their taxes. Keep in mind, though, that mileage can only be deducted if it exceeds 2% of the employee’s AGI. So if employees don’t drive much for work, they won’t be able to claim the deduction. However, the Tax and Cuts Job Act suspended taxpayers from deducting employee business expenses as their deductions when completing their taxes. So, if you don’t meet certain criteria, you may not deduct mileage from your taxes.
The Mileage Reimbursement Rate and What It Means
The IRS sets a Standard Mileage Rate each year. The rate is based on driving cost research conducted by Runzheimer:
“The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile.”
Mileage reimbursement should cover or exceed a normal car’s wear and tear
The cost of gas and wear and tear repairs
Should You Calculate Mileage Costs Manually or Use the IRS Rate?
The IRS says this about calculating mileage expenses:
“Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.”
However, the standard mileage rate is more than sufficient in most cases. Employees who drive cars getting less than 18 miles per gallon might want to consider calculating costs manually.
Tracking Mileage Easily
No matter how much an employer decides to reimburse employees, tracking mileage with Timesheets.com makes it easy. The employee simply adds the miles on the expense sheet and the system calculates the total dollars to be paid based on the mileage amount that the employer sets up.