How Much To Reimburse Employees For Mileage

The IRS sets mileage rates for employees who operate their own personal vehicles at work (they also set rates for charitable, medical, and moving purposes).

What sometimes confuses people about this is that the IRS sets a mileage rate, but does not mandate reimbursement by the employer. Many employers think they have to reimburse mileage but, in reality, they don’t.

The IRS rate is a guideline for employers and a tax deduction opportunity for employees.

IRS Standard Mileage Rate for 2014

The standard mileage rate generally increases slightly every year but for 2014 it is going down. The new IRS increased the rate is 56 cents per mile.

A company can reimburse its employees whatever it wants – from zero cents per mile to over the IRS maximum. There is no law mandating how much or how little to reimburse employees.

Even if you don’t reimburse your employees, they can recover the costs on their taxes. Whatever amount an employer does not reimburse, employees can deduct on their taxes. If employers reimburse more, however, which is perfectly acceptable, employees have to claim this mileage excess as wages on their taxes.

Even still, employees don’t usually appreciate it when their employer doesn’t reimburse them on every paycheck. Gas costs and repairs are out of pocket expenses and getting paid back for those expenses only once a year (at tax time) may put a lot of employees in a tough spot.

While businesses can reimburse employees any rate of their own choosing, a BLR Survey found that 73% of respondents (144 in total) actually reimbursed employees the max IRS rate. What you do is your own choice. I’ve tried to help break down the pros and cons in this post.

Use Expense Sheets to Calculate Mileage Payments

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.

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.

How to Obtain the Miles

  1. Employees can write down their odometer readings and calculate the miles manually.
  2. Use Google Maps to see the miles the employee would drive to get from one point to another. You can set up the route to start at the office and then travel to multiple points.
  3. Get a smartphone app for mileage tracking and track the miles based on GPS.

Once you’ve got the miles, enter the value into your expense sheet and the system will calculate the reimbursement amount. You can pay this amount on the next pay day.

62 thoughts on “How Much To Reimburse Employees For Mileage

  1. Pingback: IRS Announces Higher Standard Mileage Rate 2nd Half of 2011 | John F Howes CPA

  2. Pingback: Employees Can Deduct the Mileage Employers Don’t Reimburse « The Timesheets Blog

  3. I run a pet sitting service and am unclear as to if I only reimburse my employee for mileage between homes or also from her home to the homes we service as well. What do I do?

    • From my understanding if she has no office other than her house then you would have to pay her from the first house she stops at for the day to the last one. The travel from her house to the first client, and from the last client home is on her. It’s a sticky thing sometimes and to get absolute clarity on the issue for your area it would be best to contact your tax adviser or local state taxation and revenue department. Also many states will have taxation and revenue seminars for small businesses free or low cost.

    • I have a maid service in Atlanta GA. We reimburse $10 a day for the driver for simplicity.
      We do not pay for wear and tear of the car.

      You can also go to mapquest and calculate their route. You will see their actual gas cost. If they are leaving from the office you can start calculating there. If they do not have to return to the office at the end of the day, then the calculation stops a the last job of the day.

      • Wow! Is that even legal in your state? Even though the federal law doesn’t mandate anything most states require employers to reimburse employees for all costs, including depreciation, which can be massive. 10 bucks might just cover gas for the day. You are short changing your employees big time. Hopefully, they are deducting tons on their federal tax returns. How little you pay your employees, they may deduct so much that they still lose since their effective tax rate could be zero but could have gone much further if not for the lack of funds.

  4. We have several golf courses and I would like to know how to reimburse an employee who uses their own Golf Cart form location to location. It gets about 30mpg. We reimburse our employees who use their own cars the standard IRS rate. I don’t think we should reimburse a golf cart the same as a car. We don’t have a policy currently in place. Thoughts?

    • That is an interesting situation. You could ask the same question about employees using the Prius. Electric cars could change the whole reimbursement playing field.

      Ultimately, though, what you reimburse is completely up to you. If you don’t wish to reimburse for mileage, you don’t have to. Or if you wish to reimburse less that is your freedom. Your employee can claim the unpaid mileage on his taxes. The only possible caveat is that your employee may not be very happy with you and might leave the company.

    • Our state does not mandate that we pay mileage at all. I do just because it helps attract and retain workers. I have done mileage in the past and they were only compensated much less than $10 a day on most day. On very few occasions when I tried to pay per federal mileage amounts that they went over $10.00.

  5. If an employer provides a partial reimbursement for mileage to the employees, does that employer also claim that mileage when they do their taxes and do they get the full reimbursement from the IRS?

    In other words, is the employer pocketing the difference if they can claim all the employees mileage?

  6. Pingback: IRS Counts Excess Mileage Reimbursment as Wages « The Timesheets Blog

  7. How often should I reimburse employees for their mileage? Currently it works out to be once a month on average, but occassionally is more often than that. It seems excessive.

    • My current employer reimburses with bi-weekly payroll. Mileage is included in the payroll check. Mileage is tracked on the timesheets. My previous employer paid out mileage on non payroll weeks as a separate expense check. That system tracked mileage as and expense not as time. in either case it worked out to approximately 26 weeks a year or twice a month.

  8. my employer pays .33 cents per mile i travel for work. The IRS standard is .55. When i file my taxes will i be able to get the difference for miles traveled?

  9. I work delivering pizza and paid as a tipped delivery driver. Is there a mandatory mileage to be paid to drivers? I’m using my own vehicle.

  10. Angel,

    There is no federal law mandating that an employer pay delivery drivers. Many pizza places choose to pay their employees some kind of mileage reimbursement as a benefit but it is not required. You will want to keep very accurate records of your mileage – write down the mileage at the beginning and end of each delivery – and then claim whatever was not reimbursed by your employer at the end of the year.

  11. Is the amount reimbursed for using an employee’s own car considered to be taxable income, and as an employer do I have to include it on my employee’s W2?

    • It depends on how much you reimburse the employee. If you reimburse up to or below the federal mileage rate, then it is not considered taxable income. If you reimburse above, then it is.

  12. Currently our small company does not offer any reimbursement for mileage. We are growing and now have several locations in the state and our managers have responsibilities to visit each location frequently. If we did institute a mileage reimbursement, is there any difference between who we reimburse (managers vs. front line staff)? At this point, it’s the company culture that believes that if you are salaried and a manager, you are EXPECTED to bear the cost of driving your own vehicle. Also, if we did start expensing miles, do we have any increase in liability for our drivers? Do we NEED to verify valid DL’s and that our employee have valid auto insurance? Thanks for your reply!

    • Hi Nikki,

      Employees and managers alike can claim mileage as a business expense. Whether the employer chooses to reimburse is up to the employer. No person working for a company and driving his/her own vehicle for business purposes should have to bear the cost of gas, wear, and tear.

  13. If you are required to use your own vehicle for work and get reimbursement at the Federal amount, can your employer require you to have a vehicle 5 years or newer or they won’t reimburse? Talking about mileage of 1,000 per week is possible.

  14. i am employed with an agency for over 14 years. I am getting mileage reimbursement but the agency i work for was my base station (the main office) for fourteen years. Now i was given a new base station which I have no reason to go there for anything. I have to deduct a round trip mileage after each of my visits going to see clients from the new assigned base station which is 22.5 miles. Is this legal to do to an employee.

    • Technically, the business can choose to reimburse what they choose so it is fine that they use their new base station as a starting point.

      In order to know what is accurate for your tax deductions, though, you should write down your odometer reading each time you drive for the company. So if you leave the (old) base station and head out to your jobs, write down the odometer reading from that location and then again when you return to it. Don’t worry about the new base station which you never visit.

      If this is how your company wants to calculate it, that’s fine. But for your own purposes, you need to keep track of the actual mileage.

      For more information on deducting mileage on your taxes, take a look at this post. http://blog.timesheets.com/2012/07/03/employees-can-deduct-the-mileage-employers-dont-reimburse/

  15. I work for a oilfield service company that charges $2.00 pr mile on my personal car but only reimburses me $0.56 . keeping the other $ 1.44 , is that legal can they do that.

      • Seems like what she’s saying is, they’re charging the client $2.00 for the business service but only reimbursing her at the IRS rate, which again is their prerogative. I would think she can either tell them to rent her a car to do the work or claim it again on her taxes even though she’s reimbursed, whose checking?

      • Tell them to rent you a car or use a company vehicle and get a gas card from them as well OR claim it again on your taxes even, whose checking? Im just saying

  16. I travel from Lafayette la to Venice la on the end of the delta. total round trip is 465 miles for my job… on my service ticket i charge shell oil $2.00 pr mile = $ 930.00 and we get $0.56 pr mile only receiving $260.40……they profit off my truck $670. said it was for insurance purpose but theirs doesn’t kick in till ours is depleted.

  17. Would the mileage deductions (federal tax) be available to all tax-payers? Or, does it only come into play when a tax-payer itemizes?

    • From the IRS website: “Generally, if you are an employee, to deduct your car expenses including expenses that exceed reimbursement under an accountable plan, you must complete Form 2106 (PDF) or Form 2106-EZ (PDF) and itemize your deductions on Form 1040, Schedule A (PDF).”

  18. Is there any loophole that states you can claim round trip mileage even if you’re only driving one way? My boss always claims round trip from the office to the bank each day, but actually only goes a couple of miles out of her way on her way home. She says this is legal. Yes or no?

  19. My employer informed us that he is not going to pay us by getting lost while we are trying to reach locations. Is this legal? In fact, he is telling us that we need to change/alterate our own odometer in order to fit the “new rule” accordingly. Is this legal?

    • Jason, I would suggest speaking with a lawyer. Most lawyers are happy to give a few minutes of free advice if you don’t already have an established relationship with one.

  20. Do employers typically pay for drive “time” in additon to mileage? We have a courier who visits each of our offices to pick up mail, etc. The offices are quite a distance from each other, so there is considerable drive time (like two plus hours), but she only spends about ten minutes at each location.

    • To my knowledge and from my own experience, employers typically pay employees as though they are on the clock while driving errands. It would depend on the nature of the errand and the type of work.

  21. I travel for a company and carry all the supply’s in my car 7 days a week. They give me .46 a mile and use orbits for business. I was told by h and r block i couldn’t get reinbursed because it was not a government site. That only government employees can claim the diff of .46 to the .56 difference. Is this true? I drive almost a 1,000 miles per week in my own car. Should i be going else where to do my taxes?

  22. My Company pays me .55 a mile. but deducts the amount of money i buy in fuel on the trip on the company card. For example, .55 X 2.026 = 1,114.30. Then they deduct the fuel, $306.43. Total $807.87. Can I claim the fuel as a deduction? or the mileage that it would take to reach 306.43?

    • Lance,

      The IRS rate is a guideline for employers and the rate at which employees can claim deductions on their taxes. If you are still uncertain of how this works, speak with an accountant or tax specialist.

  23. Is it legal for a company to pay some employee’s a higher mileage rate than to other employee’s? It seems everyone should be paid the same rate?

    • Dee,

      While it may not seem fair, the IRS rate is just a guideline so employers can use it as they wish. If your employee pays you less than the IRS rate, feel free to deduct the remainder on your taxes. But be sure to keep records!

  24. In your own experience, what is more beneficial to deduct my miles from my taxes or my employer get me pay $ 0.55 for miles.
    I think this is very little comparing for all the wearing up and the risk of using my car.
    Thank you

    • They can. It depends on whether the employer is making payments according to an accountable plan. It would be best to check with a CPA or even your employer’s payroll company.

  25. I have several case workers who travel throughout the day. One worker lives out of town, but comes in to the main office each morning. She usually has cases lined up in the evening in her hometown. Do I pay her mileage for leaving the office and going to her hometown since she would be traveling that way anyway?

    • What a good question! As the IRS would see it, she is technically driving for work purposes while at work. This would make these miles deductible on her taxes. Whether you want to reimburse her for this, though, is ultimately your decision. As long as it doesn’t cause any hard feelings, it may be fine not to. But if other employees are having their miles reimbursed, she may feel she’s getting shortchanged. Whatever you decide to do, she should be aware that she can claim this mileage deduction (as long as she keeps records), which might be a pretty big chunk for her.

  26. I pay an hourly wage to my employees only when they are with a client, but i pay them mileage to get to next client. Is this right to do?? I am in CA if that makes a differene.

    Thank you,

    Stacy

  27. I have been traveling 2 days a month for my employer for the last 7 months. I leave from my home but my mileage is from my main work place. I am not on the clock when I travel to the location but I am paid for the mileage from the main work location( about 30 miles there and 30 back). When I get to the travel location, I clock in. When I depart the travel location and drive back to the main location, I am on the clock and paid the mileage. My employer recently told me I could not do this (which is what they told me to do in the first place) Is there some law or tax implication that is effecting this decision?

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

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

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

  31. I have a question on mileage reimbursement for employees that travel to multiple destinations throughout the course of their business day. As we are not able to reimburse for their commute to and from work, my question primarily deals with their return travel at the end of the day to their home residence.

    For instance if the last site the employee visits is 40 miles from home, we typically would not reimburse them for their commute. However, since their job took them so far from home and increased their commute would it be fair to reimburse them for a portion of their commute home?

    I was thinking if it took them 10 miles for their commute to work, but the last job of the day has them 40 miles from home; I would reimburse them for 30 miles which would deduct 10 for their standard commute. What are your thoughts?

    Thank you

    • I’m glad you asked! I have heard employees complain about this very thing before. When they don’t get reimbursed for those extra miles that a business trip put them out of the way from their house, they feel cheated. And I can understand why! If the employer sends you 30 miles out from your work place, it seems he should bring you back too, unless it’s on the employee’s way home. Then everybody wins. However, it doesn’t look like this time is technically considered work time so you don’t have to reimburse if you don’t want to.

      I did a little research and here’s what I found out:

      First of all the DOL says this:

      “normal travel from home to work [whether at a fixed location or at different job sites] is not work time”

      Then I found this example on the Cornell University Law School page:

      “If an employee normally finishes his work on the premises at 5 p.m. and is sent to another job which he finishes at 8 p.m. and is required to return to his employer’s premises arriving at 9 p.m., all of the time is working time. However, if the employee goes home instead of returning to his employer’s premises, the travel after 8 p.m. is home-to-work travel and is not hours worked. (Walling v. Mid-Continent Pipe Line Co.,143 F. 2d 308 (C. A. 10, 1944))”

      Now, it looks as though you would only have to pay your employee their hourly wage if the employee were sent to work in another city. This would fall under this circumstance making the travel time compensable:

      “Special Assignment: Where an employee regularly works at a fixed location, but is given a special assignment in another city, such travel is not ordinary home-to-work travel because it is performed for the employer’s benefit to meet the needs of a particular and unusual assignment. Notably, all of the time spent traveling to the special assignment is not necessarily compensable – the amount of time it would have taken the employee to commute from his home to the fixed location may be subtracted, as it remains non-compensable.”

  32. Pingback: Paying Employees More Or Less Than the Standard Mileage Rate | The Timesheets Employee Management Blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s