Is mileage reimbursement taxable income?
Mileage reimbursement may or may not be taxable as income depending on your situation. In this article, we go over the instances when mileage reimbursement for operating and driving a vehicle for business purposes is taxed as income and when it is not.
When is mileage reimbursement not taxed as income?
If the following requirements are met, mileage reimbursement is not taxable:
- Your employer uses the IRS standard mileage rate to reimburse your business-related driving
- The reimbursement happens under an Accountable Plan.
In short, to be considered accountable, the reimbursement must be based on services done for an employer (i.e. for business), be adequately accounted for and any mileage allowance excess is returned within a reasonable period of time.
The IRS lists the details of Accountable Plans online. We recommend you read through our appropriate guide for employees, employers or self-employed as well as the requirements for mileage records to make sure your reimbursement will not be taxed.
When is mileage taxable?
Any reimbursement that is considered "nonaccountable", e.g. does not meet the requirements for an Accountable Plan, is taxable as income. This includes:
- Any excess reimbursement, compared to the IRS' standard mileage rate.
- Any excess reimbursement that was paid out but not returned in a reasonable time.
- Any reimbursement that is not based on adequate records.
It does not matter how exactly you are reimbursed as an employee — mileage allowance and reimbursements are both compared to the IRS mileage rate. As long as they are less than or equal to the rate and accountable, the reimbursement will not be taxed.
How to automate your mileage logbook
IRS Mileage Guide
- Mileage rates 2020
- IRS mileage rate 2021
- IRS mileage rate 2022
- Is reimbursement taxed?
- IRS medical and charitable mileage
- For employers
- For employees
- Mileage log requirements
- What is the IRS mileage rate
- Calculate your reimbursement
- Current mileage rates
- For self-employed