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What is a Vehicle Reimbursement?

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  • Written By: Laura M. Sands
  • Edited By: Heather Bailey
  • Last Modified Date: 15 November 2016
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    Conjecture Corporation
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A vehicle reimbursement refers to an individual driver being reimbursed for the cost of driving a personal vehicle while conducting business on behalf of a company or government agency. Reimbursement is typically calculated according to the number of miles an employee or agent drives to and from specific work locations for the purposes of meeting with clients, facilitating special programs or any number of other work-related tasks. Whenever a vehicle reimbursement program is made available to assist employees with travel-related expenses, the exact amount offered per mile driven is understood before a trip is made.

In order to receive a vehicle reimbursement for mileage driven, employees are required to document starting mileage readings and end point readings so that mileage used during the course of work is accurately calculated. After submitting mileage amounts using the appropriate reporting forms, employees are then usually given a separate check for mileage used or a reimbursement for mileage may be included on an employee’s future paycheck. Per mile amounts are also usually set according to federal mileage reimbursement calculations.

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A vehicle reimbursement plan helps in offsetting the cost of fuel and maintenance for employees required to drive their own vehicles during the course of work. Such is particularly useful for employees who spend a great amount of time driving to multiple work sites or performing other field duties on behalf of a company or government agency. Amounts offered for reimbursement may vary among companies, but within an organization each employee is usually reimbursed at the same rate as others within the company for mileage driven in a personal vehicle.

Vehicle reimbursement is not only offered for automobile travel, but many agencies also reimburse employees for the use of other personal vehicles, as well. A few such vehicles include airplanes or motorcycles. Special permission to use other personal vehicles must be granted prior to their use, however, if vehicle reimbursement is expected.

In some instances, another type of vehicle reimbursement may also be offered by another agency besides a direct employer. In the United States, the Internal Revenue Service (IRS) has calculated special rates for individuals who use a privately owned vehicle for business purposes, as well as for moving in order to do business. Rates are also available for individuals using personal vehicles for select charitable or medical purposes. The amount of each of these rates is different, but each is calculated according to the most recent research reflecting transportation costs. Once an individual calculates the total mileage used for these activities, the IRS allows the total to be claimed as a deductible when reporting personal taxes.

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