Mileage Reimbursement: Rates, Rules, and Tips

February 8, 2018

Decide if mileage reimbursements are something you should offer to your employees. If you already are, here are some tips for the best enforcement.

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Those who drive a lot for work are going to like this: The Internal Revenue Service increased the mileage reimbursement rate for 2018. As of January 1st, mileage for business travel goes up one cent to 54.5 cents.

Say you’ve hired a salesperson who spends a lot of time on the road going from client to client. Mileage reimbursements cover the costs of operating his or her personal vehicle for business purposes. The reimbursement takes into account certain expenses like wear-and-tear, gasoline, registration fees, insurance, and depreciation. If an employee uses a company car for business travel, they should not receive a reimbursement.

Do you have to pay for this mileage reimbursement?

In a word, maybe.

There is no federal mandate requiring private businesses to provide mileage reimbursements. However, California and Massachusetts have state laws that require reimbursements.  Employers in these states cannot get around paying this reimbursement.

It’s incumbent upon the employee to maintain accurate mileage records. For this reason; you should consider providing them with a pre-printed form that requires they provide you with all the information you need to track such as dates traveled, destination, the purpose of travel, and the mileage driven. It’s not necessary to record odometer readings, just the mileage.

What if you don’t offer your employees mileage reimbursements?

Let them know that these are tax-deductible expenses. Offering mileage reimbursements has its benefits.  Employees appreciate this perk and it’s been shown to increase their satisfaction. A 2010 BLR survey found that 73% of respondents reimburse the maximum allowable IRS rate.  Another benefit: your company receives a tax break because mileage reimbursement is a deductible business expense.

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However, an employer does not have to reimburse the full amount the IRS recommends; the employer can reimburse a lesser amount, and the employee can still write off the difference on their own personal taxes.

Talk to your Journey Employer Solutions payroll specialist about the best way to track and pay for this reimbursement.  If you have any questions regarding the taxation of this, please ask your CPA, or ask Journey to be connected to a trusted accountant that can help guide your business in the right direction financially. 

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