The IRS & Unreimbursed Employee Mileage
Many employers directly reimburse employees for work-related transportation expenses, including using their own vehicle for work purposes. Federal tax law allows employees whose employers do not reimburse them for these expenses to claim the expenses as a deduction on their income tax returns. An employee may claim these unreimbursed employee mileage expenses as a deduction under certain circumstances, according to the Internal Revenue Service.
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Unreimbursed Employee Expenses
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Federal tax law permits taxpayers to claim a wide range of itemized deductions on IRS Schedule A. Mortgage interest, charitable contributions, and state and local taxes are common itemized deductions. These itemized deductions also include job expenses, such as work-related subscriptions, professional dues and unreimbursed employee mileage. For the 2011 tax year, the IRS's standard mileage rate for calculating the costs of operating a vehicle for business purposes is 51 cents per mile. Using the standard mileage rate is optional. Employees may also calculate the actual costs of using their vehicle.
Deductions Requirements
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Federal tax law allows employees to deduct unreimbursed job expenses, including unreimbursed transportation costs, if they meet certain requirements. The employee must have paid or incurred the expenses during the tax year in which he is claiming them. The expenses must be related to the conduct of the employee's trade or his performance as an employee. The expenses must be ordinary and necessary. The IRS considers an expense ordinary if it "is common and accepted in your trade, business, or profession" and necessary if it "is appropriate and helpful to your business." Employees cannot deduct the transportation costs of commuting to and from their regular place of business.
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IRS Forms
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IRS Form 2106 or 2106-EZ enables employees to calculate deductions for their business expenses, including unreimbursed mileage. Employees enter unreimbursed mileage expenses on Line 21 of Schedule A as a job expense and claim a deduction, subject to a 2 percent floor, on Line 40 of IRS Form 1040.
The 2 Percent Floor
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Job expenses and certain other deductions, including tax preparation fees and safety deposit box expenses, are subject to a floor of 2 percent of adjusted gross income floor. Adjusted gross income is a taxpayer's gross income minus such adjustments to income as deductions, exemptions and other credits. If an employee's total job expenses, including unreimbursed employee mileage, and other deductions on Line 22 and Line 23 of Schedule A equals or exceeds 2 percent of his adjusted gross income, he can declare the expenses as deductions on Line 27 of Schedule A. If these expenses do not meet this 2 percent floor, he must enter "0" on Line 27 and cannot claim a deduction.
Records
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Taxpayers must keep records that support all deductions they claim on their tax returns. When claiming unreimbursed employee mileage, employees should have a log of actual miles driven with their personal vehicle for work purposes or records of the actual costs incurred.
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