Employees Can Deduct the Mileage Employers Don’t Reimburse
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 2012 is 55.5 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 .555 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 55.5 cents per mile, the taxpayer cannot deduct anything.
- If the employer reimburses less than 55.5 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 .255 of a dollar per mile on his yearly taxes.
Use Expense Sheets to Calculate Mileage
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.