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5 Min. Read

Guide to Employee Mileage Reimbursement Law

Guide to Employee Mileage Reimbursement Law

Have you ever had to travel anywhere for work? If you have, did you use a company vehicle or your personal vehicle? If you used your personal vehicle, you may be entitled to get reimbursed for the mileage you drove.

But how exactly does it work? Are there laws that surround employee mileage reimbursement? Is there anything important that you need to know? While there are no federal laws that require your employer to reimburse you, some states have different rules.

There are often additional expenses that can come with using a personal vehicle for business needs. So, employers are federally required to reimburse an employee for mileage if their wages fall below minimum wage. That said, several employers have policies in place for mileage reimbursement regardless.

If you are a small business owner looking for more information around mileage reimbursement, you have come to the right place. Below you will find everything you need to know when it comes to employee mileage reimbursement laws.

Here’s What We’ll Cover:

What Is Mileage Reimbursement?

How Does Mileage Reimbursement Work?

Mileage Reimbursement Laws

Key Takeaways

What Is Mileage Reimbursement?

Simply put, if you use a personal vehicle for business-related purposes, you can get reimbursed for travel expenses. The most common expenses are things like fuel, any needed maintenance and overall vehicle depreciation. However, some employers might have policies that are set up a little differently from others.

Some businesses use a monthly flat rate if employees regularly travel for business using a private vehicle. But it’s usually a set per-mile rate. A monthly flat rate can sometimes lead to an employer overpaying for expense reimbursement.

How Does Mileage Reimbursement Work?

There are a few pieces of criteria that need to be met for mileage to get reimbursed.

The first is that the expenses need to be related to business use. So, if you are using your personal vehicle to travel for business, any fuel you use would get considered as an expense. But, any maintenance that’s needed because you went off-roading on the weekend would not count.

The second is that you must provide your employer with documentation of any expenses that you incurred within a specific period. Keep any receipts or other documents that could be used to prove any expenses.

The third is that any excess reimbursement needs to get returned to your employer within a reasonable amount of time.

Mileage Reimbursement Laws

There is no federal requirement to reimburse an employee for mileage if they use their personal vehicle for business needs. That said, there are a few legal considerations when it comes to employment law and tax law.

However, your employer is federally required to reimburse you if your net pay falls below the minimum wage. If this happens, employers could leave themselves open to lawsuits or legal penalties for not paying an employee minimum wage. Each year, the IRS sets a standard mileage reimbursement rate.

A lot of employers reimburse their employees at this rate, but it’s just an average number that’s based on data from the previous year. Another legal consideration is that mileage reimbursement can be tax-deductible. And, it’s not technically considered income so it’s not taxable.

However, sometimes mileage reimbursement could get considered compensation depending on the true expenses. Some employers decide to offer a flat rate when it comes to mileage reimbursement. This allows them to comply with any relevant employment laws.

But, if the rate is too high then it could lead to turning into taxable income for you. Which could increase payroll taxes for your employer.

Key Takeaways

It can be a difficult process to try and establish a company policy for employee mileage reimbursement. What should the rate get set at? How do you know where to start? Here are a few things to consider to help get started:

  • Understand geographic data that can affect typical driving costs
  • Find information about mileage and vehicle costs for individual drivers instead of a monthly flat-rate
  • Use mileage reimbursement software to help track any miles driven

With a flat-rate mileage reimbursement, it’s usually set at a certain amount of cents per mile driven. Some employers follow the standard rate that the IRS sets. But you can crunch some numbers to determine the mileage reimbursement rate that works best for your company.

It’s important to keep records and documentation of actual costs and mileage expenses. This can help make sure any mileage reimbursement requirements are met. Plus, it makes sure that you are compensated the right mileage rate for using a personal vehicle for business purposes.

If you aren’t sure if your company has employee mileage reimbursement or aren’t sure what the rate is, check with your employer. They can explain any specific things to keep in mind and let you know exactly how it works. That way, you can make sure that you receive the right reimbursement for any expenses incurred for work-related purposes.

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