If your employers require you to travel or use your own car for work, Federal laws allow you to get tax-free mileage reimbursements from your employer. Now some employers might have a mileage reimbursement policy, and some might not since State laws might vary from Federal laws. However, you can always get compensated for the cost of using your personal car for work. So, it’s always a good idea to keep track of your work-related mileage.
How to calculate work-related mileage?
There are mainly two ways of calculating work-related mileage expenses when you’re using your personal vehicle for work purposes. One is to track your work-related miles and use the IRS standard mileage rate to calculate your reimbursements. The other is to keep track of your actual vehicle expenses (depreciation, licenses, gas, oil etc.)
- Multiply the miles you drive for work by the Internal Revenue Service standard mileage rate, which changes every year (and sometimes twice a year)
- Calculate actual expense (Depreciation, licenses, gas, oil, tolls, lease payments, insurance, garage rent, parking fees, registration fees, repairs, and tires). Your deduction is based on your business use percentage, i.e., your business miles as a percentage of your total miles.
Using the 2019 IRS Mileage Standard Mileage Rate
The IRS does an annual study to find the costs of operating a vehicle. From that study, they are able to calculate a standard mileage reimbursement rate for every mile driven. According to the IRS, “the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 58 cents for every mile of business travel driven, up 3.5 cents from the rate for 2018
- 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018
- 14 cents per mile driven in service of charitable organizations, unchanged from the rate for 2018
Most businesses give employees mileage reimbursement forms. These forms might ask you for the following information about your work-related drive:
- Business purpose
- Miles traveled
- Total miles
Using Actual expenses
The second method of tracking actual vehicle expense requires a lot of attention and not to mention a lot of paperwork. You would need to individually track each of the following expenses, as well as record trips both personal and work-related, to allocate these costs accordingly ( e.g as a percentage, i.e., your business miles as a percentage of your total miles)
- Regular maintenance
- Registration Fees
No mileage reimbursement policy
When your employer does not provide any mileage reimbursements, you can report the entire amount of your expenses (using either the actual expense or standard mileage method) with Schedule A with your other “ job expenses and certain miscellaneous deductions. This post by Turbo Tax is a great resource for more details about mileage reimbursement and deductions.
Now that you’re familiar with the basic principles of mileage reimbursement, prepare for it and be tax-ready! You’ll need to fill out a lot of paperwork, and keep tabs on virtually every possible vehicle expense. For example, if you elect for the standard mileage rates, you will need to keep track of a number of things, such as dates driven, business purposes, origins, destinations, traveled miles, and total miles, but even though it does seem like a lot of work, you’ll end up making sure you either get reimbursements for work-related mileage or get deductions for it during tax season.
Fortunately, the use of mileage tracking apps can help automate the entire process. TripLog offers the best-in-industry mileage tracking and reimbursement platform for SMBs and Enterprises. Starting with the free plan, you can track up to five personal vehicles, an unlimited number of trips, expense tracking, auto, and manual mileage tracking, and more. Check out our mileage tracking app to see how you can maximize your mileage reimbursement or deductions on your work-related mileage.