Jan 19, 2023

How to Get Your Mileage Reimbursed by the IRS?

Here's a guide on mileage reimbursement and deductions in the US from Vincere Tax. Read more in this blog.

What is mileage reimbursement?

Mileage reimbursement is the money you get back when you use your personal car for business. All of the costs of owning and driving your car for the qualified miles are covered by the reimbursement. The IRS mileage reimbursement covers the use of certain cars, vans, pickups, and panel trucks.

Mileage reimbursement is usually calculated by the mile and covers all of the costs of owning and running a car for work. When employees use their own cars for work all the time, some companies prefer to pay them a fixed amount every month. Mileage reimbursement can be deducted from the taxes of employers, self-employed people, and independent contractors.

Vincere Tax can help you with the tax implications of business taxes, stocks, bonds, ETFs, cryptocurrency, rental property income, and other investments.

What is the current rate of federal mileage reimbursement?

The current federal mileage rate for 2023 is:

- For business purposes, the rate is 65.5 cents per mile.
- For medical and moving purposes, the rate is 22 cents per mile.
- 14 cents per mile donated to charity

Mileage rates 2022

The federal mileage reimbursement rates will be in effect from July 1, 2022 to December 31, 2022.

- For business purposes, the rate is 62.5 cents per mile.
- For medical and moving purposes, the rate is 22 cents per mile.
- 14 cents per mile donated to charity (this rate remains the same)

The official mileage rates from January 1st, 2022 to June 30th, 2022

- For business purposes, 58.5 cents per mile
- For medical and moving purposes, the rate is 18 cents per mile.
- 14 cents per mile donated to charity

Learn more about the IRS mileage rates for 2023, as well as the previous IRS mileage rates for 2022.

What counts as mileage for business?

The IRS says that business mileage is the distance driven between two permanent or temporary places of work. Some trips that are usually considered business-related are:

- Traveling between two different workplaces
- Meeting with clients and making customer visits
- Running errands for business

See the IRS publication on transportation for more information and examples of what qualifies as business mileage.

Is reimbursement for mileage tax deductible?

Since mileage reimbursement is not considered as a benefit, it is not subject to income tax. However, any excess is taxed as part of your income if you are reimbursed at a rate greater than the usual IRS rates.

Rules for mileage reimbursement

For employees:

If you use your personal vehicle for business purposes, your employer may be able to reimburse you for mileage. While there are no federal laws requiring employers to reimburse their employees for mileage, state laws may require it. In California, for example, this is the case. Your employer may reimburse you at the IRS mileage rate, FAVR (fixed and variable rate), or a fixed monthly mileage allowance.

  • The standard mileage rate is intended to cover all fixed and variable costs associated with using your vehicle for business purposes and is typically paid out after you have provided a log of your business mileage.
  • FAVR is made up of two payments: one for fixed costs and another for variable costs.
  • A mileage allowance is typically paid in advance on a monthly basis, so you have cash on hand for your business mileage expenses for the month.

Keep in mind that all types of reimbursement payments, regardless of method, must be no more than the IRS mileage rate per mile. Excess mileage will be taxed as part of your earnings.

You must provide mileage records in order to be reimbursed for business driving. Continue reading to find out more about maintaining IRS mileage records. According to the Tax Cuts and Jobs Act, as an employee, you will not be able to claim mileage as a tax deduction if your employer does not reimburse you.

For self-employed people:

As a self-employed taxpayer, you can deduct business-related mileage. You can deduct all expenses related to owning and operating a car if you use it solely for business. You can only deduct the cost of business travel from the total if you use the car for both personal and business travel. For tax purposes, there are two methods for calculating your mileage claim as self-employed: the standard mileage method and the actual expense method.

1. The standard mileage method is the simplest way to claim IRS mileage. It allows you to use the IRS mileage rate for business miles.

2. Use the actual expense method to claim the expenses you incurred while operating your vehicle for business purposes during the year. Keep in mind that this method will take more time and will necessitate the collection of all receipts for your vehicle expenses.

Every year, you can claim a mileage deduction on your tax return.

Maintaining accurate records for your IRS mileage reimbursement

The IRS mileage reimbursement rules define what constitutes a sufficient record of your mileage. Employees and self-employed individuals should keep the following records:

  • Total distance traveled on each trip
  • The trip's duration and purpose
  • Your final destination
  • The total mileage for the calendar year
  • The records you keep must also be timely - that is, they must be kept at or near the time of the trip.
Keep in mind that if you use your vehicle for both business and personal purposes, you should keep track of both to determine the percentage of business use for which you can claim mileage reimbursement.

How to Calculate the Percentage of Business Use

You can only claim mileage for business use of your vehicle, according to IRS mileage reimbursement rules.

Let's look at a quick example of determining business use:

You've driven ten personal trips totaling 200 miles. You've also driven three business trips totaling 100 miles during that time period. The total distance you've driven is 300 miles.

1. Divide your business miles by the total mileage to calculate your business use. In our example, your business mileage is 33% of your total mileage.

The formula is straightforward: 100/300 = 0.33 = 33%.

2. Then, multiply the business mileage you've driven by the current IRS mileage rate to calculate your total mileage reimbursement based on the federal mileage reimbursement rate.

100 business miles multiplied by 58.5 cents equals $58.5.

We hope you found our brief overview of IRS mileage reimbursement rules useful.


How does mileage reimbursement work?

If you use your personal vehicle for business purposes, your employer may compensate you in the form of mileage reimbursement. The mileage reimbursement covers all costs associated with owning and driving your car for business purposes. Mileage reimbursement is calculated in cents per mile.

What exactly is considered business mileage?

Business mileage is defined by the IRS as any driving done solely for business purposes. Driving out of the office to meet clients, get supplies, or run other business errands, for example. It is important to note that commuting between your home and your place of employment is not considered business mileage.

How do you calculate mileage reimbursement?

Multiply your business mileage by the current mileage rate provided by the IRS or your employer to calculate your mileage reimbursement. For example, if you drove 400 business-related miles this month and your employer reimburses you at the standard rate, you can calculate your mileage reimbursement as follows: 400 miles multiplied by 65.5 cents equals $ 262 in mileage reimbursement.

Talk things over with your tax advisor to come up with a strategy that will benefit you the most.

I hope this information was helpful! If you have any questions, feel free to reach out to us here. I’d be happy to chat with you.

Vincere Tax can help you with the tax implications of business taxes, stocks, bonds, ETFs, cryptocurrency, rental property income, and other investments.

Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!

This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.

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