Calculating mileage reimbursement starts by knowing when you actually need to reimburse your employees. Although many employers think that they have to pay for mileage , the federal Government does not require you to reimburse employees. However, there are certain states that have regulations. California, for instance, requires employers to reimburse employees for any losses incurred while completing work duties.
If you need to calculate reimbursements, we have a handy mileage calculator tool you can use.
The IRS sets the mileage reimbursement rate for employees who drive their own Privately Owned Vehicles (POV), but this rate is a guideline for employers and a tax deduction opportunity for employees. You can choose whether or not you want to pay your employees more or less than the IRS rate. Also, keep in mind that you have to follow your state’s reimbursement regulations as well. In Addition to that, under FLSA regulation, you must pay your employees the standard minimum wage. If their expenses lead them to an hourly rate below minimum wage, you will have to assist them with the cost.
The IRS has a guideline for reimbursable and non reimbursable expenses when an employee uses their own POV for business duties. Here are some reimbursable and non reimbursable expenses:
Reimbursable Expenses
- Parking fees, ferry fees, bridge, road, and tunnel fees, and aircraft or airplane parking, landing and tie-down fees.
- When your employee uses their POV on official business in the immediate vicinity of their residence or official station.
- If an employee drives to one or more temporary job locations, as long as they do not drive directly from their residence and office.
- When the employee reports to your permanently assigned office and then travels to other work sites.
- If your employees have to travel for training purposes, they are entitled to reimbursement if the training is within city limits of your official work station. However, reimbursement in this case is subject to the review and approval of the manager.
- If your employee stops en route between their residence and the workplace for work purposes, they should get reimbursed for driving after the stop.
Non-reimbursable expenses
- Your employees will not receive reimbursement between their homes and office or their temporary work location.
- Charges for repairs, depreciation, replacements, grease, oil, antifreeze, towage and similar expenses, gasoline, insurance, state and federal taxes.
- You do not have to reimburse employees for parking at an assigned office space when it is incurred in connection with direct travel between their residence and office.
- Miles driven solely for personal reasons.
Do the Math
IRS standard mileage reimbursement rates (as of 2021):
- 56 cents per mile driven for business use
- 16 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
How to calculate mileage reimbursements
The travel distance is determined by the actual miles driven in the odometer readings. Before your employee starts driving to the work location, he will take note of the number on the odometer. Once the employee drives to the next location, he will take a note of the new number on the odometer. The difference of the two readings is the amount of miles that the employee drove.
To compute mileage calculations, multiply the applicable mileage rate by the number of miles the employee drove.
For example, imagine that your employee drove 15 miles to get from your office to a temporary work location.
15 miles x $0.58 (reimbursement rate)= $8.70 due in reimbursement
Finding Solutions
The best way to calculate mileage reimbursement is finding a solution that will do the math for you. Timesheets.com allows you to track time for your business and track your expenses, all under one roof. Our system allows you to enter your preferred mileage reimbursement rate so when employees enter their miles and upload an image of their odometer, we can provide automatic calculations that are available to managers in real-time.
