Gas Costs Are Covered In Mileage Reimbursement

mileage gas costs

Mileage reimbursement is intended to cover all the costs associated with operating a vehicle for business purposes, including wear and tear on the car as well as gas costs.

Employers who reimburse mileage, should not also reimburse for gas or for oil changes. Mileage reimbursement should cover all of those expenses.

Of course, an employer can reimburse whatever he or she chooses and if this just covers the cost of gas, that is fine (in most states). If an employer does not reimburse the full IRS rate, then employees can deduct that portion from their taxes. Keep in mind, though, that mileage can only be deducted if it exceeds 2% of the employee’s AGI. So if employees don’t drive much for work, they won’t be able to claim the deduction. However, the Tax and Cuts Job Act suspended taxpayers from deducting employee business expenses as their deductions when completing their taxes. So, if you don’t meet certain criteria, you may not deduct mileage from your taxes.

The Mileage Reimbursement Rate and What It Means

The IRS sets a Standard Mileage Rate each year. The rate is based on driving cost research conducted by Runzheimer:

“The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile.”

Mileage reimbursement should cover or exceed a normal car’s wear and tear

The cost of gas and wear and tear repairs

Should You Calculate Mileage Costs Manually or Use the IRS Rate?

The IRS says this about calculating mileage expenses:

“Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.”

However, the standard mileage rate is more than sufficient in most cases. Employees who drive cars getting less than 18 miles per gallon might want to consider calculating costs manually.

Tracking Mileage Easily

No matter how much an employer decides to reimburse employees, tracking mileage with makes it easy. The employee simply adds the miles on the expense sheet and the system calculates the total dollars to be paid based on the mileage amount that the employer sets up.

Make mileage reimbursements easy!

28 Responses

  1. What if a volunteer loans her car for a church trip and a different volunteer puts gas in the same car? Do I reimburse the gas for one and mileage for the other?

  2. This calculation is very UNFAIR regardless of whether it was implemented by the IRS .
    1) For example, in the above scenario , the sales girl who drives a 100 miles per day x 20 days per month =2000 miles x mo or 24,000 x yr. 72,000 miles over 3 years. A typical 3 yr lease only allows 12,000 per year or 36,000 miles at lease termination. At the end of the year lease, she will owe mileage overages of 36,000 miles multiplied by anywhere from 25 to 60 cents per mile.
    2) the above scenario states the sales girl drives a car which gets 29 miles per gallon which is a very high number considering few cars get that mileage in combined city/hwy driving . Well what if the sales girl does not commute in Kansas and instead drives through dense metropolitan traffic areas such as downtown NYC, New Jersey, Los Angeles, Chicago or Philadelphia, her vehicle may get 4 to 8 miles per gallon while stuck in traffic.
    3) Gas should be reimbursed separately for people driving in these areas. Not to mention car insurance premiums can cost thousands of dollars per year more than in rural areas. For example the national average auto insurance premium is 536.00 per year, while NY can average 1,200.00 to 2,500.00 per year.
    4) to fairly determine what a company should reimburse an employee would be for that company to calculate what it would cost them to own or lease a vehicle and all its associated costs of operation. At 53.5 cents a mile, the employee is footing a good portion of the auto expenses which is coming out of his earnings. The employer saves a considerable amount over owning and leasing a vehicle, which in my opinion is completely unfair.

    1. The employer has the option to reimburse or not reimburse their employees for mileage or for actual vehicle expenses, if the employer doesn’t reimburse their employees for either then the employee can claim either (not both) the mileage or the actual vehicle expenses as a deduction on their tax return, the employee will need to keep good records which includes copies of the actual receipts for gas, vehicle maintenance and/or repairs, oil changes, insurance, etc. and for mileage a detailed mileage log that is documented the day of or shortly after the miles were put on the vehicle including proof of the miles on the vehicle at the beginning of the tax year and ending of the tax year (copies of oil change invoices, vehicle service records, etc. showing the miles on the odometer) the employee can then decide which expense would be more beneficial for them, either the mileage or the actual vehicle expenses. A lot of times it is more beneficial to claim the actual vehicle expenses then it would to claim the mileage but until you add both expenses up you wont be able to determine which is the better way to go. It would be unfair if the IRS only allowed a mileage deduction because as you stated sometimes it cost more for actual vehicle expenses than the 53.5 cents a mile when you’re not racking up the miles on your vehicle. .

  3. Hello, thank you for all the information and food for thought. ..

    My situation is a bit different from the example given:

    I may travel from 100 to 225 miles a day for work; my schedule will vary from 3 – 4 days a week, and from 5.5 to 8 hrs per day.

    This schedule is also true of my co-workers.

    My employer used to pay a set rate per mile driven for work – $0.25 per mile.

    Now, they are going to use the following formula to determine “fuel reimbursement”:

    # of miles driven in a pay period
    Divided by 15 (we’re paid semi-monthly)
    Multiplied by their determination of prevailing gas price per gallon (now $3.30/gallon)

    How can this work using my schedule as detailed above?

    Csn you (or anyone) suggest an alternate formula that accommodates a varied schedule during the pay period, won’t bankrupt the employer, yet is still fair to the employee?

    Thank you!

  4. As an owner of an LLC, do I reimburse myself for mileage or do I keep it as a company taxable expense? (its not a reimbursed expense through my client/customer, its just the mileage I incur for business travel).

  5. My job pays the going rate for gas mileage, but then I am taxed on it. Is this right , & what can I do about being taxed on that part of my pay?

  6. If an agency for handicapped citizens has you transport supported individuals to and from work, grocery shopping , medical appointments and the like; the agency is reimbursed by both the state & federal government- are they required to reimburse the employee/chauffeur the prevailing federal reimbursement of $0.58 per mile? It is our vehicle, wear & tear on the car and insurance. And while we’re at it, what about our cellphone use?

    1. I don’t believe there’s any requirement that you’re reimbursed driving a personal vehicle, but you can check with your local labor board about that. The federal rate is a guideline that’s used for tax purposes. It’s not a law that mandates you get paid a certain amount. That being said, you may be able to get certain tax deductions for using your car and phone to work. As you tax pro what kinds of benefits can be claimed next year when you’re getting ready to file your taxes. It would help if you kept accurate records of driving you do for work and of your work-related cell phone use.

    1. If your employer gave you a credit card to use for gas, I assume that you’re not getting charged– your employer is. Therefore, there would be no need for your employer to compensate you for gas because he/she is paying for it already.

      1. If the employer pays the gas can you still claim the mileage on your taxes for wear and tear and maintenance costs?

  7. So I work for a service company as a 1099 employee and I am offered mileage reimbursement from them in addition to my hourly wage. With fuel cost going up can I seek reimbursement for fuel as well from my employer. It was told to me that I could not receive both fuel expense and mileage reimbursement from them as it was “double dipping”. All I can find is that I can not claim both on my taxes but nothing about getting it paid from the company.

  8. If we have an account with a gas station and we allow employee to fill their cars up when they have to use their vehicle, what then should they be reimbursed for mileage?

    1. If an employer is paying for gasoline, then they shouldn’t have to reimburse the employee for gas. You should only have to reimburse an employee for gas when they’re paying for gas themselves while driving a personal vehicle or company-owned vehicle for work purposes. Some states not only require you to pay for gas, but they also require you to pay for vehicle depreciation and more. I suggest that you contact your local labor board to check on your state’s reimbursement laws.

  9. I recently changed my reimbursement status with my company. I drive my own truck for company use 5 days a weeks avg 300 miles. I was receiving the IRS .56 per mile. This rate should cover fuel, wear tear, depreciation, insurance, and partial loan payment. I was on the wrong end everytime. I calculated I was losing out 100$ a month. I get 15 to 16 mpg combined, insurance premiums always rise and fuel costs constantly fluctuate in Texas, My compant wnats to help me benefit and gave my a CC for fuel and maintenance. Buti was told i cannot submit for any mileage anymore. Am I wrong in saying that either i should still receive a rduced mileage reimbursement to offset cost of wear tear, insurance, and truck payment. I am close to just requesting a company truck but i searched for a long time for this specific vehicle. What are your thoughts? Thank you.

    1. Hi Anthony. Texas law prohibits an employer from exceeding the $0.56 mileage reimbursement rate, so they are only allowed to give you the maximum rate. As it seems in 2021, $0.56 is the max. It sounds a little tricky– I would recommend that you consult with an HR expert in your area, as they’ll know how to advise you moving forward.

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