Does the Mileage Reimbursement Rate Include Gas?

The IRS allows a standard per mile rate for mileage reimbursement.

It is logical to assume that you should not be taxed on reimbursement of expenses that you incur on behalf of your employer. The IRS approves several different methods for reimbursement of expenses related to transportation and the use of a personal vehicle for business use. Their primary criterion is that they be reasonable and consistently applied and that they be properly documented. The easiest method and the one that most people are familiar with is the cents per mile rate.

Cents-Per-Mile Rate

Every year the IRS calculates and publishes the amount of the standard cents-per-mile reimbursement rate. For 2011, the standard mileage rate for cars, vans, pickups and panel trucks is 51 cents per mile for business miles, 19 cents per mile for medical or moving miles and 14 cents per mile for service to charitable organizations. The standard calculation is based on an annual study including all fixed and variable costs of operating a vehicle.

Limitations on Use of the Cents Per Mile Rate

The IRS states that you are free to use actual expenses rather than use their cents per mile calculations subject to certain limitations. You cannot use accelerated depreciation on your vehicle the first year and then switch to a cents per mile method the second year because the cents per mile calculation includes straight line depreciation within its calculations.

What Fixed Expenses are Covered?

The standard cents per mile rate is designed to cover all fixed expenses involved in owning and operating a vehicle and although the IRS does not specifically list each and every one of these expenses it does refer to some of the possibilities. It lists some fixed expenses as depreciation or lease payments, insurance, license and registration fees and personal property taxes.

What Variable Expenses are Covered?

In addition to the fixed expenses involved in owning a vehicle, the cents per mile rate is also designed to cover the variable expenses actually involved in driving those miles. Some examples of variable expenses are gasoline (and the taxes on gasoline), oil, wear and tear on the tires and even the cost of routine maintenance and repairs. So basically, if you use the cents per mile option it is designed to cover all expenses involved in operating a vehicle. However, you may be eligible for additional deductions for parking fees, tolls, interest and taxes if they apply.

references & resources