Mileage Reimbursement Commute Rules

To deduct reimbursements as a tax expense, businesses must maintain records of business travel.
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Businesses may reimburse employees for work-related mileage expense and claim a tax deduction. However, the mileage associated with the employee's regular commute doesn't count as mileage expense. If an employee isn't fully reimbursed for mileage expenses, he can claim the unreimbursed portion as an employee business expense.


Mileage Reimbursement Requirements

The IRS provides a few guidelines for businesses to reimburse employees for mileage expense. If done correctly, the payment is nontaxable to the employee and the business may deduct it as an expense. To claim the deduction, the IRS requires that the business documents the details of the expense and verifies that the travel was for business purposes. For the payment to be nontaxable to the employee, the employee must document work-related expenses and return any excess reimbursements he receives.


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Reimbursement Rates

The simplest way for a business to reimburse employee mileage is to use the IRS standard mileage rate. This rate is designed to cover the average cost of gas, car maintenance, repairs, insurance, registration and depreciation. The rate is 56 cents per mile driven as of 2015, and it's adjusted on a regular basis. Alternatively, a business may decide to reimburse only specific auto expenses, like the gas bill for an out-of-town trip. It can even choose not to reimburse mileage at all.


What Mileage Counts

For mileage to be deductible, you must be driving or traveling for a work-related purpose. Visiting a client, picking up supplies or traveling for a conference are all valid reasons to claim mileage expense. However, the IRS specifically disallows employees and businesses to deduct the mileage involved in a normal commute to work. To account for this, you should subtract the amount of miles involved in your normal work commute from your reported mileage. For example, say that your home is a 10-mile round trip from your regular workplace. Instead of going to your regular workplace, you worked at a client site for one day, which was a 30-mile round-trip commute. The mileage incurred minus your normal commute -- 20 miles -- is reimbursable and deductible.


Unreimbursed Mileage

If you drove for work and your employer didn't reimburse you or only partially reimbursed you, you can claim a tax deduction on your personal tax return. Employees are allowed to deduct unreimbursed work and business expenses on Form 2106. Unfortunately, the deduction is limited. Miscellaneous itemized deductions, such as unreimbursed employee expenses, are deductible only to the extent they exceed 2 percent of your adjusted gross income.



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