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Mileage reimbursement is when an employee is reimbursed for using their personal vehicle for business purposes. The reimbursement rate is usually based on government guidelines and employees must provide accurate accounts of their business miles. The US government may allow a tax deduction for businesses or individuals who use automobiles for business purposes. Travel from home to work is generally not reimbursable.
When an employee uses their personal vehicle to conduct business for the benefit of their employer, they may be reimbursed for associated costs in the form of mileage reimbursement. By doing this, a corporation absorbs some of the fuel costs and wear and tear on the car at a predetermined rate, easing the financial burden on employees. In the United States, this is an optional benefit; as such, the US government may also allow a tax deduction for businesses or individuals who use automobiles for business purposes. Corporations generally base the mileage reimbursement rate on guidelines set by national government agencies, such as the Internal Revenue Service (IRS) in the United States, but not always.
Employees working for organizations that offer mileage reimbursement are generally required to provide an accurate account of the business miles they drive. Most companies have a standard form, called an expense report, for which the employee fills in pertinent information describing the places they drove, the number of miles they traveled to get there, and the business purpose of each particular visit. When management approves the expense report, the employee is reimbursed for the costs incurred. This is usually calculated by taking the number of business miles driven and multiplying that number by the current reimbursement rate set by the employer.
In the United States, the IRS publishes optional standard mileage rates based on the cost of operating a car. Gasoline prices from the prior year are generally also considered in the estimate. Employers may choose to reimburse staff members based on this suggested rate. They can also deviate from it at their discretion.
Some companies choose not to offer mileage reimbursement at all. When they do, however, they may be entitled to include that expense as a tax deduction on their corporate returns. Similarly, people who do not receive mileage reimbursement from their employers may also be eligible to itemize auto expenses as a deduction on their personal income tax returns.
Travel from a person’s home to a place of employment is generally not reimbursable for either an employment unit or an individual. In other words, if a person typically drives 20 miles a day from his home to her office, he generally can’t claim that as a legitimate expense. However, throughout the day, if you drive to other locations to make sales calls or conduct business for your employer, you can usually claim compensation for the extra travel when mileage reimbursement is offered.
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