Does an Employer Have to Reimburse Mileage?

Standard Mileage

Each year the IRS sets standard mileage rates for business-related driving. Technically, the standard rate is the amount per mile you are allowed to take as a tax deduction for business expenses. Employers frequently use the IRS rate as a basis for reimbursing employees. The standard rate varies from year to year. In 2009, for example, the rate was 55 cents per mile. In 2010 it dropped to 50 cents per mile, but in 2011 rose to 51 cents per mile. When employers choose to reimburse employees for business mileage, it's normally at or below the IRS standard mileage rate. An employer could reimburse you at a higher rate, in theory, but the excess over the standard rate would be considered taxable income.

You can claim a mileage reimbursement -- or tax deduction for non-reimbursed mileage -- for qualified business-related driving. For example, trips to see clients, to pick up office supplies or inspect a branch location all qualify. Travel from your home to work and back does not qualify. Bear in mind that if you are using your car for business purposes, you may not conduct personal business at the same time. Once you do, all remaining miles driven on that trip are considered personal use. The IRS standard mileage rate applies to cars, SUVs and vans. Panel trucks and pickups also qualify. As of 2011, the rates also apply to vehicles used as taxis. However, the standard mileage rate does not apply to a tow truck, dump truck or other vehicle used as equipment.

You must document your business mileage. TurboTax recommends that you buy a mileage log at an office supply store. Record the vehicle odometer reading on the first and last days of the year you use the vehicle for business purposes. Keep a record of each trip, starting with the initial and ending odometer reading and the date. Include the purpose of the trip and where you drive. Follow your employer's policies for reporting the information if you are receiving reimbursement. If not, keep the record as documentation when you file your tax return.

If your employer does not fully reimburse you for business mileage at the standard rate, you can take the unreimbursed portion as a tax deduction. For example, if your employer reimburses you at 35 cents per mile and the IRS rate is 51 cents per mile, you can deduct the unreimbursed 16 cents per mile from your taxes.