Is Mileage Reimbursement Considered Taxable Income?

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If you’re a mobile employee who uses your personal vehicle for work, you are probably getting reimbursed by your employer. You may be wondering if that reimbursement is taxed or if all of it goes back into your pocket.

Generally, mileage reimbursement is not taxed as income. However, there are specific scenarios when this rule can be broken. Here’s everything you need to know on whether mileage reimbursement can be taxed as income.

When Mileage Reimbursement IS NOT Taxed

Your reimbursement is tax-free under these conditions:

  • The company is using the IRS standard mileage rate (and employees qualify for reimbursement)
  • The reimbursement happens under an accountable plan

To be considered accountable, the reimbursement must be based on services done for an employer (that is to say, for business purposes). In addition, it should be adequately accounted for, and employees should return any excess reimbursement within a reasonable amount of time.

Related: IRS Mileage Commuting Rule: What Businesses Need To Know

The IRS explains the requirements for an accountable plan on its website. For more specific information related to your company type, see the appropriate page in this guide.

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When Mileage Reimbursement IS Taxed

If your mileage reimbursement does not meet the IRS accountable plan requirements, it will be taxed as income. Here are some specific instances where reimbursement is taxed as income:

  • If your reimbursement exceeds the IRS standard mileage rate, it is taxed as income.
  • Any excess reimbursement that employees did not return within a reasonable amount of time is also taxed as income.
  • If the reimbursement was not based on adequate records, it could be taxed as income as well.

As long as your mileage reimbursement is less than or equal to the IRS standard mileage rate and follows an accountable plan, the reimbursement will not be taxed.

Develop a Mileage Plan With TripLog

Managing your company’s mileage reimbursement process does not need to be complicated. Ditch those tedious and inaccurate pen-and-paper mileage logs for a modern solution!

Using a modern mileage tracker app is the best way to track your team’s mileage for reimbursements. Company mileage tracking has never been easier.

Download TripLog on iOS or Android, or schedule a complimentary web demo today.

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Mileage Reimbursement Savings Calculator

Using outdated manual mileage logs can cost businesses thousands of dollars per year in lost time and incorrect reimbursements. See how much TripLog can help you save!

Number of drivers

Average miles daily per person​

Number of trips daily

Cents-per-mile

Annual mileage reimbursement costs based on the numbers you provided.

Annual Mileage Reimbursement

50 mi/day x 100 drivers x $0.54 (5 days x 50 wks)

$675,000

This is the inline help tip! You can explain to your users what this section of your web app is about.

According to research, on average employees inflate the mileage by 25% when self reported.

Estimated Reimbursement Savings

25% x Annual Mileage Reimbursement

$168,750

People on average spend 2 minutes on manually recording trips.

Manual Entry Hours

2 mins x 10 trips/day x 100 drivers (5 days x 50 wks)

8,334 hr

Taking national average $25 hourly rate.

Estimated Labor Savings

Avg. $25/hr x Manual Entry Hours

$208,334

Your Company

could save

(Labor Savings + Reimbursement Savings) / Number of Drivers

$4,167

per driver