If you’re an employer in the United States, it’s likely that you pay your employees mileage reimbursement when they’re traveling for work purposes. Every year, the IRS adjusts the mileage reimbursement rate based on examination of variable costs. Based on the latest study, the IRS has changed 2021’s mileage rate to a lower rate than last year. Taxpayers will use this rate to compute their deductible costs associated with using a vehicle.
What is The New 2021 Mileage Rate?
As of January 1st, 2021, this new mileage rate applies:
- $0.56 per mile when driving for business use (this is 1.5 cents lower than 2020’s rate).
- $0.16 per mile for any mileage associated with medical purposes.
- $0.14 when a person is serving a charitable organization.
When Employers Must Reimburse Employees
For starters, employers are not legally required to pay their employees’ mileage when they’re traveling for work purposes. In fact, the IRS doesn’t have federal regulations regarding whether employers have to pay employees back for any miles they drive. Employers are only federally required to reimburse employees for work-related expenses.
Although that is the case federally, employers in states such as California, Illinois, and Massachusetts require employers to reimburse their employees’ mileage and other work-related expenses. Overall, it’s a wise idea to check with your state’s laws before you choose (or decline) to reimburse employees to ensure that you’re following proper protocol.
Please keep in mind that employers are not required to reimburse employees when they’re traveling from home to their initial work location or when they are returning home.
Calculating Mileage Reimbursements
Calculating mileage reimbursement is fairly simple. To do this, you just need to multiply the mileage reimbursement rate by the amount that you traveled. For example, if an employee’s odometer begins at 20,355 miles and concludes with a reading of 20,506 miles, they drove 151 miles altogether. 151 miles multiplied by $0.56 is $84.56 in a reimbursement total.
Many businesses use systems like Timesheets.com to keep track of their mileage reimbursements. It’s an online time and expense tracking system that keeps track of your employee data and performs these types of calculations for you, so you never have to take time out of your busy day figuring out an employee’s reimbursement amounts yourself.
Get Ready for the Change
Now that the new year has begun, you’ll want to keep accurate track of any expenses that your employees accrue. Find an organized way to keep track of mileage and reimbursement rates so that you can pay employees properly and file your taxes correctly. Remember, if you’re unfamiliar with your state’s reimbursements laws, you’ll want to check with your local labor board to ensure that you’re following the law correctly.
Need to track mileage reimbursements for yourself or employees? Try Timesheets.com for free now and see how it works!
4 Responses
I work for a company that does in home supportive services. I think they pay me 16 or 17 cents per mile to take the consumer to medical appointments, shopping, etc. I’m not sure what to think
Your reimbursement rate depends on which state you work in. Most states don’t require employers to follow the federal rate; it’s only just a guideline to use when reimbursing employees. If I were you, I’d check with my local labor board to understand the reimbursement rate rules in the area. There’s a chance that your employer is allowed to give you $0.17 per mile
Live in California, I have 2 stores each one I work at 2x’s and the other 3x’s a week and then switch etc. I would think that my employer would pay mileage if I am needed at the opposite store I was scheduled at that day (store to store).. They are saying no because both stores are my home store????. There is 52 miles round trip between store and if they did reimbursement me I would get .30/mile and back and forth would take a minimum of 1 hour. So with that said the day I am suppose eat the cost which is 1 hr of pay, which makes it a complete wash and would have saved money if I said home.
Hi Joanne. According to IRS rules, your employer does not have to reimburse you when you’re traveling to and from your official and first work station. Therefore, when whether you’re traveling to work at one store or the other, your employer isn’t obligated to reimburse you. If you go to store #1 in the beginning of your shift and then travel to store #2 afterward for a night shift/late day shift, you may receive mileage reimbursement for that. You can read this article to get more information about CA reimbursements: https://blog.timesheets.com/2015/12/mileage-reimbursement-california.