UPDATED JAN 06, 2021 • 2 MIN READ
Before we show you the fairly straight forward calculation that will help you find your mileage reimbursement, be aware that you need to qualify to use the IRS's standard mileage rate. Check our guides for the details.
Also, be aware that if you're an employee, your employer might use a different rate than the one we use here. They may also have different rules for mileage reimbursement. If you're self-employed, you should check the current mileage rates to make sure you use the correct ones.
We'll look at the two most common situations:
A: You drive your personal vehicle for business, and your company uses the IRS's standard mileage rate to figure out how much you should be reimbursed.
You have kept records for the past month, and they show that you've driven 175 miles for business. The standard mileage rate is 56 cents per mile. To find your reimbursement, you multiply the number of miles by the rate:
[miles] * [rate], or 175 miles * $0.56 = $98.
B: You drive the company's vehicle for business, and you pay the costs of operating it (gas, oil, maintenance, etc.).
In this situation, you can't use the standard mileage rate. This is because it's meant to cover both the cost of owning and operating a vehicle, but in this case you only operate it. Your company has instead set a rate of (for example) 21 cents per mile.
To determine your reimbursement, you run the same operation again:
[miles] * [rate], or 175 miles * $0.21 = $36.75.
So here we can see that owning the car you drive for business results in higher reimbursement–but you also have higher costs, especially when you include the car's depreciation.
Knowing the portion of a car's use that is for business (not personal use) is useful for figuring out how much you can claim for depreciation and other costs of operating that vehicle. Let's go through a quick scenario:
You've driven 200 personal miles in a given period. During the same period, you've also logged business trips that totaled 100 business miles.
To figure out your business use, divide your business miles by the total number of miles driven. In our example, you've used your car for business 33% of the time: 100/300 = 0.33. Make sense?
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For more information, we suggest you continue reading our guides as they provide information necessary to each situation that you will need to take into account.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for, legal, tax or accounting advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal, tax or accounting advisor.