Gas Mileage Reimbursement for Work Travel Expenses in USA

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Business travel expense deductions, like mileage reimbursement, can be especially relevant to US-based taxpayers who own their own business, work as a freelancer or contractor, or who travel a lot for work.

Working out what you can and can’t deduct can be quite complex and depends on many qualifying factors.

Read on for an explanation of the key things to keep in mind when working out your deductions for work-related travel.

If you drive for charitable organizations, medical reasons or business, then you need to read through the IRS 2018 Standard Mileage Rates (SMR) for the purposes of mileage deduction.

You stand to save a lot of money on your taxes if you fully understand the allowable deductions.

Starting January 1, 2018, the SMR for car use is as follows:

Category2017 Rate/mile driven2018 Rate/mile driven
Miles Driven for Business53.5 Cents54.5 Cents
Miles Driven for Medical Purposes17 Cents18 Cents
Miles Driven for Charitable Organizations14 cents

While the SMR for a business is derived by studying both the variable and fixed costs of running a vehicle, the SMR for medical purposes is based only on the variable costs.

Note: Mileage deductions are only allowable if you use your personal car for charitable, medical and business purposes.

When you drive for the same purposes using a vehicle that was purchased for the same cause, then mileage deduction is not allowable.

Standard Mileage Rate for Business

  • SMR does not apply to an employee who commutes to his regular place of work
  • SMR for business is allowable for self-employed people who drive for activities directly related to business e.g. meeting a client or attending a trade seminar.
  • Employees who incurred driving expenses when travelling outside their regular office in 2017 and were not reimbursed are allowed to file their mileage deductions from their 2017 taxes.
  • Any unreimbursed mileage for the year 2018 through to 2025 are not allowable under the new 2018 tax law.

Standard Mileage Rate for Medical Purposes

  • If you drive to receive medical care, you can claim the mileage. This includes miles driven for both your spouse and children.
  • The medical mileage deduction is added to your total medical claims, which means it will be part of your allowable medical expenses. Medical mileage deduction will only be an allowable expense if your total medical expenses exceed 7.5% of your adjusted gross income.
  • To make your tax deductions easier to compute, itemize your expenses.

Standard Mileage Rate for Charitable Organizations

All the miles covered on behalf of a charity organization recognized under 501 (c) (3) are allowable mileage deductions.

Claiming Mileage

  • Multiply the total business drives by the applicable rate for the year
  • Add the toll and parking expenses
  • Add up your total commute miles as well as your personal commute miles for the year
  • Fill out your Schedule C. Your mileage deductions will go on Line 9 while your total mileage will go on Line 44 of Part IV.
  • The Internal Revenue Service (IRS) will need; your start reading on the odometer, your commuting miles, and your non commuting miles.

What is a Mileage Reimbursement?

Mileage reimbursement occurs when a client or an employer pays you a certain amount of money for driving certain number of miles.

Mileage reimbursement is not to be confused with mileage deduction which occurs when you write off miles driven on behalf of the business against your annual taxes.

While clients and employers give you mileage reimbursement for the miles covered to attract talented workers, it is not a requirement of the IRS.

In short, the mileage reimbursement is a prerogative of your client or employer.

As long as you can substantiate the number of miles covered on behalf of the business, the IRS does not put a cap on the number of mileage reimbursement you can get.

Avoid raising the red flag by claiming a round number of miles, claiming 100% of the miles covered for the business and claiming inconsistent number of miles over years.

Claiming Parking and Tolls

As long as you have compliant records, all business related toll and parking expenses are allowable deductions.

Claiming General Vehicle Expenses

While the SMR has a lot of allowable vehicle expenses, not all of them can be deducted. You can claim;

  • Interest charged by financial institutions on the car loan
  • Personal Property tax paid upon buying a vehicle

Recording the Miles for Tax Purposes

With SMR, you don’t need to keep a lot of records. All you are required to have is to get the total miles covered on behalf of the business and the total miles covered.

Other expenses such as repairs and maintenance are not required in the SMR method of mileage deduction since a rate has already been computed.

Mileage computing can be tedious and IRS need them pretty detailed.

To ensure you are logging the miles properly, use an affordable yet clever little tool such as GOFAR and your compliance with IRS requirements will never be in question.

Standard Mileage Rate for Moving

If you are relocating for business purposes, your mileage is an allowable deduction. However, this deduction is subject to;

  • You move at least 50 miles
  • Work full-time for 39 weeks out of 12 months after you move

If you satisfy the two conditions then you can claim 23 cents for every mile covered. Note that the above conditions does not include those who are moving out of a military order.

IRS Commuting Takeaways

According to IRS, your commute is the miles covered between your home and your place of work. In this case, your home is the place you live.

For tax deduction purposes;

  • The trip between where you live and where you work is not an allowable deduction
  • The trip between where you live and the temporary work site is an allowed deduction as long as your main place of work is at a different location.
  • A commute between home and your second job is not an allowed deduction if you took a day off from your main job.
  • A commute between your regular place of work and a temporary job is an allowed deduction.
  • A commute between your main job and your second job is an allowed deduction.
  • A commute between your temporary job and your second job is an allowed deduction
  • You can turn many commute drives into business drives by having a home office.

To figure out what type of commuting is tax-deductible, always observe this rules;

  • Any type of commuting is not deductible unless in the above conditions
  • Even if you work during the trip, the commute is still not deductible
  • A commute between home and temporary work site is deductible
  • You can nullify the commuting rule above if you have a qualified home office

Restrictions to SMR

  • If you do not use the SMR mileage deduction method, your only option will be the Actual Expense Method (AE) which involves tracking actual expenses incurred while driving for business.
  • You are required to use the SMR method during the first year that you use the car to drive on behalf of the business, otherwise you are stuck with AE method.
  • Once you have used the SMR method in the first year, you can switch between the methods, but this is subject to some restrictions. However, this condition allows you to use the method that gives you the most benefits.
  • If you use SMR method, you cannot deduct the actual expenses of running the car.
  • Depreciation is part of the SMR and hence even if you feel that it ought to be higher for tax purposes, you are stuck with the rate.
  • It is important to note that the rates discussed will start to operate for the tax year 2018. This means that the returns you will file in 2019 will operate under this taxation regime.
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