Is Mileage Reimbursement Taxable?

A businesswoman is driving on the job.
Image Credit: Plush Studios/Bill Reitzel/Blend Images/Getty Images

Is mileage reimbursement taxable? It's a good question, considering the confusing rules around mileage and taxes. The Tax Cut and Jobs Act that went into effect beginning in 2018 muddied the waters regarding reimbursing and deducting business travel and mileage.

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A company paying mileage reimbursement is not the same as an employee or self-employed person claiming a mileage deduction. If you receive a mileage reimbursement from your employer, that might or might not count as taxable income under certain circumstances.

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Consider also:Form 1099 Tax Deductions: 10 Top Deductions for Independent Contractors

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Deductions vs. Reimbursement

If you drive for your business, you can take a deduction for each mile driven if you are not an employee (i.e. you are an independent contractor or gig worker). If you are an employee and your company does not reimburse you for work-related travel, you can't deduct those miles.

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If you travel for work as an employee and your employer reimburses you, putting that money on your paycheck, that money might be taxable, depending on whether you're getting an allowance benefit or getting the exact amount you're due, based on your mileage.

Consider Also:What Is a Schedule C Form: Who Needs to File & How to File

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Employees vs. Self-Employed Workers

Only self-employed workers, such as independent contractors, freelancers, small-business owners, gig workers and sole proprietors, can write off qualifying business miles. You claim this deduction on Schedule C of your Form 1040. In the past, employees could claim this deduction, but that changed with the passage of the TCJA in 2018.

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Qualifying miles are those that are necessary for you to do your work. The major exception to this is commuting miles. If you travel to the same location each time to do your work – even if it's as an independent contractor – that's considered a commute.

For example, if you're a contract hairdresser who works a few hours at the same salon several times each week, that's a commute. If you work for a variety of salons on a non-scheduled (irregular) basis and go to clients' homes or elder care facilities on a non-scheduled basis, that's qualifying business travel.

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Consider also:Tax Deductions for Business Travel Expenses: What You Need to Know

Allowance vs. Reimbursement

Is mileage considered income? If you are an employee and your company gives you ​$300​ per month as a travel stipend (because you use your own car for company travel, for example), that's considered taxable income, explains employee benefits solutions provider, mBurse.

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If you only get money from your company when you submit an expense report for actual miles traveled, that's a reimbursement and not taxable – if the reimbursement rate is not higher than that year's IRS mileage number.

Your employer must use an Accountable Plan, and you must keep records of your mileage, which must be work-related and reimbursed no higher than the IRS mileage rates. For 2021, the IRS mileage deduction rate was ​56 cents per mile​ and rose to ​58.5 cents per mile​ in 2022.

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