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In case you are an employee of a company, who uses personal vehicle for business purpose, then you will be eligible for the mileage reimbursement. This thing is also true for the business owners, who use their vehicles for their business purpose. But for most of the people, it is not clear the ways to calculate mileage reimbursement. So, to help you out, this article offers the details of mileage reimbursement and what is needed for it and also how to calculate things that you deserve.
1. Details of business mileage deduction:
The business mileage deduction is basically a type of allowable business expense considered by IRS in case someone uses the vehicle for business purposes. The mileage deduction rates are applicable to the individual business owners, employees and other taxpayers. One can claim this type of deduction by using four-wheeled vehicles for business purposes. But it is not possible to claim business mileage deduction by using a taxi service.
The IRS every year sets a specific rate of mileage deduction and in 2018; this rate is 54.5 cents every business mile driven.
2. How to calculate the mileage reimbursement?
IRS only demands accurate and timely records. So, it expects the employees or the business owners to maintain a daily log mentioning destination, miles traveled and the purpose of business. The easiest method of doing it is to stick to a specific “at-the-time” log. So, write down the things as you go. And to do it, keep a small log book in the vehicle and write down the detail whenever you travel for the purpose of your business. In case you are an individual business owner, traveling for business purpose, then include the name of the client and the purpose of business. You can even record the total mileage or can add it later from the map program available on the web. There is also a number of driving mileage calculator apps that can help you in this regard. The only important thing here is to keep a proper track of where you started and where you ended up. Apart from that, it is also necessary to add the additional expenses like parking, gasoline and the amount in case you are going to be deducting the actual auto expenses instead of the standard mileage deduction. But overall, it is comparatively simple to calculate the mileage reimbursement.
Now let’s have a look at the formula how the mileage reimbursement is calculated:
All you have to do is to multiply the total business miles driven by the rate of reimbursement.
For instance, in case you drove 2000 miles and get the reimbursement of .60 cents per mile, then the reimbursement will be (2000 X .60)= $1200. This formula can further be tweaked on the basis of the rate of reimbursement and the driving.
3. How do the businesses calculate mileage reimbursements?
Businesses usually follow per-mile reimbursement or car allowance. Here the allowance is actually a specific set free for the employees every month. On the other hand, the reimbursement includes paying a certain agreed-upon fee per mile. But a number of companies still depend on the manual mileage logs for the purpose of mileage reimbursement. This process is ripe for inefficiencies and mileage inflation. So, the modern business owners are leaning towards more impactful solutions, which can track and log the employee mileage automatically while offering seamless reporting. This thing helps the business owners to save money and also to grow their businesses successfully.
4 Records that are needed to calculate mileage reimbursement:
Although calculating the mileage reimbursement is quite easy, but the records that are required to prove it are mostly not that easy. So, you can check with your business owner on the things that are required. Usually, the following details are needed to calculate mileage reimbursement:
- The date of drive
- The total mileage
- The business requirement for the trip
- The place where you drive for the business
5. Maintain the mileage log report
It is necessary to maintain the mileage log report in details on your every business trip. Otherwise, the mileage reimbursement process will be denied. Even in the worse situation, you might be accused by the employers of fraud in case you don’t submit supporting documents for mileage reimbursement.
