What Is a Mileage Reimbursement Rate?

Mileage reimbursement is a term used when employees use a privately owned vehicle (POV) for transportation purposes in connection with official duties. It is a monetary amount that is given to the employee and is based on the number of miles traveled. The Internal Revenue Service also uses the term for individuals who claim the use of a private vehicle in connection with a home business. For this purpose, the money is not actually reimbursed but is a calculated tax deduction.

The Facts

Companies who use mileage reimbursement for their employees who use private cars generally base their rates on the IRS rates. These rates vary from year to year but generally increase over time. Mileage reimbursement is usually given out only when specific mileage records are provided. That is, the employee must sign a form with the specific number of miles that the employee drove. The employee must also agree that the purpose of the travel was in connection with company business.

Considerations

Mileage reimbursement can also be used for travel with a motorcycle and in some cases by airplane. The employer should be consulted ahead of time because this can vary between companies. For government employees, the mileage reimbursement rates also vary with the availability of government vehicles. While some government employees might prefer to use a privately owned vehicle for the sake of convenience, the rate will be different if they are approved for use of government vehicles and those vehicles are available.

Misconceptions

Many people believe that mileage reimbursement is a way to make extra money from a company. What is seldom entered into their calculations, however, is the wear and tear on the privately owned vehicle. Mileage reimbursement rates generally cover more than the cost of fuel, but the added miles will eventually require the employee to purchase a new vehicle, which should be considered part of the cost of using the vehicle for corporate use.

Time Frame

The application for mileage reimbursement can usually be made as soon as the travel has ended. Companies can require that the reimbursement request be made within a period of time that the travel occurred. It's generally advised the application for mileage reimbursement be made soon after the travel.

Warning

When a privately owned vehicle is used for corporate travel, the responsibility for repairs remains the responsibility of the employee. That is, the cost of repair must be paid by the employee and is not part of the mileage reimbursement program.

Resources

• Internal Revenue Service