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If your employer has an expense policy that addresses employee use of a personal vehicle for business purposes, you can submit a request in accordance with company procedures for a government mileage reimbursement. The company will account for this reimbursement as an operating expense deduction on its income tax returns, based on the government's rules regarding personal vehicles used for business. If your employer does not have a policy in place, or if you are self-employed, the only way to be compensated for the use of your car may be to deduct it as an unreimbursed business expense on your personal income tax return, depending on your local tax codes. This method typically will not, technically, net you a cash-in-hand reimbursement from the government. Instead, the deduction will lower your taxable income so that you will pay less in taxes.
Governments typically make provisions in their tax code that deal with business use of a privately owned vehicle. These provisions establish the framework that employers must use to reimburse you for the use of your car for business matters. Businesses that follow the rules can deduct reimbursements made to employees as a business expense on the company's income tax return.
In the US, tax code regulations allow you to compute the amount that you should be reimbursed for use of your car by either using the exact cost of expenses or by using a flat per mile rate. The government mileage reimbursement rate is set by each government and might change every year. If you choose to use the flat rate, you should keep track of the miles driven for business purposes and multiply it by the government rate that is in effect at that time. The rate that is or was in effect for any year can always be found on the government's website.
Government mileage reimbursement is provided by your employer pursuant to an employee expense policy. Your employer is not required to reimburse you, however, just as you are not required to use your personal car to further the business. If you have used your car for business purposes and have not been compensated, you can deduct the government mileage reimbursement on your personal income tax return.
You are required to follow certain formalities when claiming a government mileage reimbursement for use of your car. You typically must keep a travel log that indicates the day, time, starting location, ending location, mileage and purpose of every business trip. This log should be turned in to your employer with your reimbursement request so it is available in case of a tax audit. Keep it as part of your records if you are self-employed or are filing for the deduction on your personal income tax return.
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