Employees Can Deduct the Mileage Employers Don’t Reimburse


The purpose of the IRS Standard Mileage Rate is not to impose a rate of payment by employer to employee, but to give the employee a guide for his or her deduction at tax time.

The rate offers compensation to the employee either through payment by the employer or in the form of a deduction for business related mileage on a personal vehicle.

Technically, an employer can pay any mileage rate he sees fit, whether that be over or under the IRS standard. But if he doesn’t meet the IRS standard, the employee can deduct that amount on her taxes.

Calculating the Deductions

A taxpayer can deduct any business miles that were not fully reimbursed at the max IRS rate by the employer. The standard mileage rate for 2015 is 57.5 cents/mile.

There are three possible scenarios for the employee at the end of the year:

  • An employee can use the whole benefit if a company does not reimburse mileage at all. The taxpayer can deduct .575 of a dollar for every mile driven in his/her personal vehicle for business purposes (this does NOT include the commute to and from work!).
  • If the employer reimburses the whole 57.5 cents per mile, the taxpayer cannot deduct anything.
  • If the employer reimburses less than 57.5 cents per mile, the taxpayer can deduct the difference. For example, let’s say the business reimburses 30 cents/mile, then a taxpayer can deduct .275 of a dollar per mile on his yearly taxes.

Proper Procedure for Claiming the Deduction

An employee cannot just pull some number out of the clouds call it her mileage deduction. Nor can she make a pretty good guess. Nor can she go to Google Maps and enter her route, multiply it by the number of times she made the drive that year, and write it on her deductions form. The IRS expects precise numbers. But you should know that already…

What you need to do is keep a log of your odometer readings each time you drive for work. This is the document that the IRS will demand if you are audited.

There are a couple of ways you can do this.

  1. Pencil and paper
  2. Smartphone apps

You can get a notebook and a pen and record it the old fashioned way. Or you can download an app onto your smartphone and let it track your mileage automatically. There are a lot of apps out there for this purpose but I found a few popular ones for both iPhone and Android and compiled a post to get you started, Mobile Apps For Tracking Mileage Readings.

Use Expense Sheets to Calculate Mileage

For employees

Even if your employer doesn’t have a Timesheets account, you can still log in as a freelancer for free and keep track of your mileage. Our software doesn’t turn on when it senses your smartphone moving over 25 miles an hour but it does give you a place to record your mileage and odometer readings as well as figure out what you should be getting back in cash based on the rate of your choosing.

For employers

Reimbursing mileage with expense software like Timesheets.com allows employers to use whatever rate they like. The administrator sets the rate, employees enter their miles, and the software calculates the total. At the end of the year, employees can run reports on paid expenses to calculate their expected tax deductions.

61 thoughts on “Employees Can Deduct the Mileage Employers Don’t Reimburse

  1. Pingback: How Much To Reimburse Employees For Mileage « The Timesheets Blog

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  3. what if you are paid a gas allowance then how much do you deduct from the .55 cents in order to receive proper reimbursment for wear and tear on my car… thank you!

    • Whitney,

      Gas allowance is essentially the same thing as mileage. So you’ll need to calculate and keep records of the miles you drive each month. Then multiply that by .55 cents. If the amount your boss gives you is more than the “mileage” you calculated, then you’ll need to claim that as wages on your taxes, if it is less, then you can claim the difference as a mileage deduction. As long as you keep records of both the amount your boss gives you and your mileage, your CPA should be able to figure this out for you at tax time.

    • I’m not paid a gas allowance. I don’t pay for gas at all. Gas is paid on a gas card. How do I calculate the .55 cents when I don’t have the gas information?

  4. Hi,

    Good info! Quick question – if I receive partial reimbursement from my employer, I now understand I can deduct the difference between the reimbursement and the federal rate of .555. However, I didn’t do this in tax years 2011, 2010 because I didn’t know I could! I read something else on another site about ” You must use the standard mileage rate the first year your vehicle is used for business purposes.” I looked the IRS regs on this, and it confirmed this statement using an example for “Larry” under the standard mileage rate (http://www.irs.gov/publications/p463/ch04.html#en_US_2011_publink100033935). Does this mean I cannot deduct the difference just because I didn’t know i could in 2010 and 2011?!? I sure hope not…the difference is alot of miles and dollars. My CPA seems to think I can.

    Thanks for your help,

    JB

    • JB,

      I think the explanation is a little confusing. I am not sure if they are saying you cannot claim unreimbursed mileage on that car forevermore or if you just can claim previous years. It sounds to me like it is the former but I am not a CPA and do not know all of the tax laws. I would say trust your CPA on this!

      Peggy

  5. Hello,
    I started working for a pet business last year in Sept and I am using my vehicle. My employer wants me to keep track of my mileage but she isn’t paying me my mileage, she told me mileage is tax free, she pays per hourly rate, per visit.
    The amount of visits is payed every other week. My employer will minus off the mileage amount which is mulitplied by $.55 that she told me on my visit $ amount to give me a lower pay rate for when she takes taxes out. After the taxes is taken out, my employer will put back the mileage amount she minus off.. I just filed my taxes last week and I didn’t collect mileage reimbusement because it isn’t my business. I enjoy helping her because it will be helping me out in the long run. I know I am putting alot of wear and tear on my vehicle and I am not getting what I should. Was I suppose to collect transportation reimbursement on my taxes? My employer never told me I could or couldn’t collect the transportation portion on my taxes, and I didn’t ask her because I was thinking by her minus the mileage off my visit amounts to give me a lower tax rate is a good deal. It is probably too late now to do anything now.

    • Hi Cindilyn,

      Unreimbursed mileage is an employee business expense. You don’t have to own the business to deduct the mileage. Mileage is tax free in the sense that you can deduct it, but as far as I know mileage is not meant to be subtracted from taxed income. It is claimed as a deduction on your taxes. If this is the way your employer is doing it, then I am guessing that she is essentially paying a part of your paycheck “under the table.” To be absolutely clear on all of this, talk to your CPA.

  6. I am paid a monthly rate tax free for using my car and then I have a fuel car on top of that. Can I deduct anything on top of that?

  7. I believe I have the same situation as cindilyn, I get paid 30% of the entire amount of revenue my route brings in, then my employer takes the amount of miles for the week x. 555 and subtracts that number from gross pay. I get whatever amount that is tax free and only pay taxes on the remainder. So essentially I’m getting a slight tax break, not actually being reimbursed anything by the company and when tax time rolls around I wont be able to deduct anything. Just another clever way for companies to make you feel like they’re putting more money in your pocket while you’re actually being screwed in the long run. L

    • You’re not being screwed in the long run; you’re effectively being given your tax refund up front because you’re not paying tax on the portion of your income that is offset by your mileage.

  8. our company wants to have a policy where we only reimburse employees over 100 miles per day. Should they keep track and then write off the rest?

  9. Pingback: IRS Lowers Mileage Rate for 2014 | Small Business Tips and Tools

  10. I am wondering if my employer can deduct mileage that I’m expecting to get off my milage report without notifying me? Recently my employer started deducting mileage from my reports that she has always paid for in the past. She done this without any kind of notice and has never told me that she was doing it.

    • Chrissy, maybe you should ask her about it. Could it be a mistake? Is the mileage payment part of your employment contract (if you have one)? If the arrangement is not in writing and she was just doing this for you, it seems reasonable that she could stop these payments at any time since paying mileage is not mandatory to begin with. However, there may be laws that I am not aware of regarding the matter. It would be worth running it by a lawyer.

  11. My partner is getting charged through his employer and also getting taxed for private mileage, which as i understand they can not do both? Also the vehicle is not used out of work hours other than to and from work.

    I am having no luck finding anything on this , has anyone got any idea?
    Thanks

  12. We are reimbursed at .45/mi. While I realize I “Can” deduct anything that I drive over that amount – If I don’t have enough deductions to get me over the IRS standard deduction rate – I just lose that money, right?

    • If your deductions are less than the started deduction rate then you aren’t “losing” any money no matter how you look at it.

  13. My employer pays a grossed up vehicle allowance to me every month, around $900 (based on a 3 year depreciation schedule for a $40K vehicle driven approximately 150K miles). I get paid $.30 / mile for every time that I drive. Can I still deduct the difference between the $.30 and IRS rate of around $.55? The $900 payment that I get from my company already has the taxes paid on it. Thanks.

    • Randy,

      If your employer is paying you any more than .56 cents per mile total, then you cannot deduct any more. To be sure, you will need to add up the total monthly miles you drive and do the calculation. If that comes to more than $900, then you should be able to deduct the difference. If it is confusing, ask your tax adviser at tax time.

  14. Pingback: Gas Costs Are Covered In Mileage Reimbursement | The Timesheets Employee Management Blog

  15. Pingback: Mobile Apps for Tracking Mileage Readings | The Timesheets Employee Management Blog

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  17. My work is 5 miles from my house however I typically travel 500+ miles a week to different work sites. My job gives a gas card and tolls. However I would be using the newly purchased vehicle about 90% for work(not including my commute to work) and 10% personal. Am I forced to pay for that car or can I write it off?

  18. Can an employer that pays you a set amount divide your check and put half your pay in route pay mileage on your check with no taxes taken out

  19. We pay for all the fuel for our employees for business use of their vehicle. Do we still give them the full mileage reimbursement allowable by the IRS?

  20. I have seen different websites going back and forth about being allowed to claim gas for traveling to work. I drive a little more than 160 miles a day to going back and forth. Would I be able to claim that?

  21. Why would the company I work for try to obscure this information? My employer of over three years now has depended on me and my truck for work-related travel, and they reimburse $ 0.38 per mile driven. However, during this whole time, I was never told that the difference between the $ 0.38 per mile and the standard mileage reimbursement rate would be tax-deductible on my yearly taxes. When I asked HR why I wasn’t told this (or this info is not included in the employee handbook), I was told “We don’t have time to call all 350 employees to tell them what their tax deductions are.” Well maybe I should email every employee in the company a link to this article, and see if there is any backlash?

    • It is unfortunate that you may have missed out on this tax deduction for the last three years. However, if you hired a tax specialist to do your taxes, he or she would have caught it. That is the benefit of hiring someone to do your taxes. They usually find all sorts of deductions and their cost is paid for in the higher tax return. It really is not your employer’s responsibility to know the tax laws as they are many and complicated. You can always amend previous tax years to receive the benefit now.

  22. My employer gives me a gas card to use for business miles. I do keep a log of my business miles and my odometer readings. Is there a percentage of the Fed tax rate I can claim due to the gas card or can I claim the full amount allowed?

    • Russ,

      What is going on here then is that your employer is paying for gas but not the full mileage reimbursement. As long as you keep track of both the miles driven and the amount he paid, you can figure what is remaining.

      For example, if your employer pays $60 in gas for a 200 mile trip, you could deduct $54 dollars on next year’s taxes. I got this by multiplying 200 miles by .57 and then subtracting the 60 dollars that the employer already paid.

  23. I volunteer my time every day and buy my gas and use my car. I drive between 100 to 200 miles per day and work 2 to 3 days a week. I get paid for mileage allowance do I have to pay taxes on my money I get for use of car and gas. I get a 1099 at end year. Should I even show this on my tax return. I don’t make a salary but I file jointly with my husband. Thank you

    • Hi Lois,

      We are not tax experts, but if you receive a 1099, I think you would have to report that as income since this company is reporting paying you (even though, I understand, it’s not pay but reimbursement). Please discuss it with a tax specialist. This is an unusual scenario.

  24. My employer cuts me a check for my mileage @.565/mile with cap of $1,350.00. I exceed that cap every month. The reimbursement is not shown on my W2. How do I claim the excess mileage?

  25. How do you actually go about claiming the difference on the tax form? I’m doing my taxes myself on h&r block.com, but don’t know where to put the remaining .06 cents per mile.

  26. Hello, can you clarify personal miles vs work miles? Eg., it is my understanding that a routine commute back and forth from the workplace is considered personal miles and therefore cannot be deducted. However, what about situations where your employer requires road travel to points other than your worksite? My employer is telling me that those miles need to be subtracted from my total commute miles before any reimbursement. Thoughts?

  27. My employer pays me $150 per check to cover cell phone and mileage. The amount is reported on my W-2 as income. How do I know what portion of that $150 I can allot to cell phone and what portion I should allot to mileage?

    • Hi Lola,

      How much does your employer say he wants to pay you for your phone bill? Half of it? Some specific portion of it? The mileage you use is a set number that you arrive at by keeping track of your mileage, the phone portion of the reimbursement should be decided on.

  28. I am self employed contract 1099 and work for a company to do warranty service work. I travel from my home to residences to do repairs. The company I work for pays only the one way mileage to these locations. Am I allowed to deduct my mileage for the way back?
    Also, if I do any service calls on my own , can I deduct the whole (there and back-round trip) mileage?

    glenn

    • I think it would be best to talk to a tax adviser about that. The rules may be slightly different as a self-employed individual since all driving for work will likely begin at your house.

  29. Can you tell me if I can be reimbursed for mileage for cashing a check if they don’t offer direct deposit? I heard this was the case in California

  30. Pingback: Should You Pay Your Employees For Mileage? | The Timesheets Employee Management Blog

  31. Rather than paying me outright for my mileage, my employer applies my mileage reimbursement toward my medical benefits deduction reducing that pre-tax deduction; and if there is anything left, I will get the cash. For example, my monthly medical benefits are $300.00 and my monthly mileage total $200.00. The $200 is applied against the $300, making my medical deduction $100, and I receive no actual monetary reimbursement. Is this allowed? I was not informed they would do it this way. I just realized it recently when I questioned a paycheck.

    • This sounds like an unusual situation. I would talk to an employment lawyer to be sure. It sounds to me like your employer doesn’t pay for medical benefits out of their pockets and that if you didn’t drive at all, you would have to pay the full amount out of your paycheck. Your employer could give you a $200 mileage reimbursement check and then you could give it back to them for insurance. It seems to me this would be a more involved process achieving the same end. But it could be more complicated than that and that’s why it might behoove you to speak to a lawyer.

      • Thank you for answering my question. I haven’t encountered this before. I will definitely discuss this with my employer. Thank you.

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