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What is a Mileage Reimbursement?

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  • Written By: Lori Smith
  • Edited By: Jenn Walker
  • Last Modified Date: 17 September 2016
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    Conjecture Corporation
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When an employee uses his personal vehicle to conduct business for the benefit of his employer, he may receive a repayment for associated costs in the form of mileage reimbursement. By doing this, a corporation absorbs some of the fuel expenses and automobile wear and tear at a predetermined rate, easing the financial burden of employees. In the United States, this is an optional benefit; as such, the US government may also allow a tax deduction for companies or individuals who use cars for business purposes. Usually, corporations base the mileage reimbursement rate on the guidelines set by national governing agencies, such as the Internal Revenue Service (IRS) in the US, but not always.

Employees who work for organizations that offer mileage reimbursement are typically required to provide an accurate account of the business miles they drive. Most companies have a standard form, called an expense report, whereby the employee completes pertinent information that outlines the places where he drove, the number of miles he traveled to get there, and the business purpose for each particular visit. When management approves the expense report, the employee is then reimbursed for the costs he incurred. This is usually calculated by taking the number of business miles driven and multiplying that figure by the current reimbursement rate established by the employer.

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In the United States, the IRS publishes optional standard mileage rates based on the cost of operating a car. Gas prices from the previous year are generally considered in the estimate as well. Employers may elect to reimburse staff members based on this suggested rate. They can also deviate from it at their discretion.

Some companies choose not to offer mileage reimbursement at all. When they do, however, they may then be entitled to include that expense as a tax deduction on their corporate returns. Likewise, people who do not receive mileage reimbursement from their employers may also be eligible to itemize auto expenses as a deduction on their personal income tax returns.

Travel from a person's home to a job site is not usually reimbursable for either an employing unit or an individual. In other words, if a person typically drives 20 miles per day from his home to his office, he cannot usually claim that as a legitimate expense. Throughout the day, however, if he drives to other locations to make sales calls or conduct business for his employer, he can usually request compensation for the additional travel when mileage reimbursement is offered.

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