Section 8 – Calculating Mileage for Reimbursement

While calculating mileage for reimbursement is a relatively straightforward process, it’s important to understand whether you qualify for mileage reimbursement. Furthermore, if you do qualify, it’s equally important to follow the guidelines outlined in other areas of this information hub as well as information provided by the IRS.

Another point to mention is the fact that an employer may use a completely different mileage rate than the one published by the IRS. When this occurs, it’s worth knowing that any reimbursement given that exceeds the IRS rate is considered income and is therefore taxable.

Properly using the mileage rate

When employees, self-employed and business owners use their personal vehicle for company or business purposes, the IRS standard mileage rate should be used to determine how much a reimbursement should be.

One example for properly using the mileage rate is recording the fact that you’ve used your own personal vehicle and driven 200 miles for a business. Since the standard mileage rate for 2020 is 57.5 cents per mile, the following equation can be used:

  • miles x rate = reimbursement amount
  • 200 miles x 57.5 cents = $115.00

The other example is that you’re using your employer’s vehicle and have driven the same 200 miles. Since the standard mileage rate no longer applies (you are using your employer’s vehicle) but you are paying the costs to operate it (gas, maintenance, etc.), the employer’s mileage reimbursement rate is 21 cents per mile. The equation used is the same, but the total reimbursement is different.

  • miles x rate = reimbursement amount
  • 200 miles x 21 cents = $42.00

As illustrated in these two examples, driving your own vehicle will result in a higher reimbursement amount, but the costs to operate your own vehicle will be higher.

When using your vehicle for business and personal use

Understanding the need to segregate the mileage used for business and mileage used for personal activities is important when using your personal vehicle for both purposes. This will allow you to better know what to claim for depreciation and other costs of operating the vehicle. An example of how to properly calculate under this scenario is as follows: you’ve driven your vehicle on a personal trip, covering 200 miles. Within the same period, you’ve driven the car a total of 100 miles for business. You can now calculate by dividing the business miles by the total miles (100/300 = 0.33). The result would be 33%, or the percentage by which you could calculate your vehicles total miles to arrive at the amount used for business.

In addition, further calculation would show that 0.33 x 300 miles = 100 miles. Next, 100 miles x $0.575 = $57.50 total reimbursement.

When attempting to properly calculate business mileage for the purpose of reimbursement, using a helpful solution such as TripLog will make all aspects of tracking, calculating and reporting much easier. TripLog can be used by employers, employees, self-employed, business owners, freelancers, independent contractors and rideshare drivers.

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Mileage & Expense Tracking and Reimbursement

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