4 Min. Read

How Mileage Reimbursement Works: An Extensive Guide

July 22, 2024

If you’re using your own vehicle for business travel, you could be eligible for mileage reimbursement. Learn how to optimize your income by keeping track of your travel expenses.

Here’s What We’ll Cover:

What is Mileage Reimbursement?

Mileage Reimbursement refers to the reimbursement you get for the miles you log on your taxes. The IRS sets a standard mileage reimbursement rate and when you file your taxes for 2021, this rate will be factored into your tax deductions.

By keeping track of your business mileage and travel expenses, you could receive a decent tax break for your business transportation costs.

Save Money with Mileage Reimbursement

When you start using your own car for business travel, there are many expenses that come along for the ride. Gas, maintenance and vehicle insurance are all required to keep you on the road. If you’re driving for work, you’re entitled to a tax break on those expenses.

Freelancers, independent contractors, and other self-employed workers know the importance of tracking expenses and keeping down costs. But how much of your daily work-related mileage have you been accounting for?

Keeping Track of Travel Costs

Cost of travel varies depending on your location, what type of transportation you have, gas price fluctuation, and other factors. Keeping a consistent record of your business travel expenses will be useful when it comes time to file your taxes, and you need an accurate record of your transportation costs.

There are apps available that will make recording your mileage easy. Download an Automated Mileage Tracker app on your phone and input the data from your transportation costs each time you get gas, maintenance, or require roadside assistance while you’re traveling for work.

What Qualifies as Travel Costs?

Did you know that 60% of travel expenses consist of just gasoline and insurance costs alone? That’s a massive amount of income loss if you’re putting extensive mileage on your vehicle for work purposes.

You should consider travel expenses as a business expense. You’re entitled to receive gas mileage reimbursement, but what other deductible costs qualify for mileage reimbursement?

Business trips
Meetings with clients and potential clients
Running errands for business supplies
Deliveries
Business moving expenses
Oil changes and vehicle maintenance

Standard Mileage Rates vary from state to state, and the IRS makes changes to the rate and policy annually. As a freelancer or independent contractor, stay up to date on the latest mileage tax deduction laws in place so you know that your business miles are covered.

How To Calculate Standard Mileage Reimbursement

Every year, the Internal Revenue Service (IRS) sets a standard mileage reimbursement rate that businesses can use to offset their transportation costs. These are rates per mile and are classified as a mileage reimbursement rate.

In 2021, the standard mileage reimbursement rate per mile is $0.56 driven for business use.

To calculate your yearly gas mileage reimbursement, when you file your taxes with the IRS you will state the total cost of eligible travel expenses and qualify for the compensation of $0.56 per mile.

Using a resource like the Automated Mileage Tracker app will significantly expedite the process of filing and calculating your overall mileage reimbursements. You may decide to keep credit card receipts from work-related travel expenses and reference them for your income tax returns. And when it comes time to file, work with a tax professional to maximize your travel pay reimbursement.

Are You Tracking Your Miles?

Whether it be delivery driving, meeting with clients, or other business travel– those miles add up, and you should track those costs to claim for reimbursement. Freelancers and independent contractors typically don’t have access to employer-provided automobiles or special mode transportation for company purposes, which puts a lot of wear and tear on personal cars for business.

Just as the IRS is keeping account of your taxable income, as a business owner keeping through mileage reports will insure a reimbursement and give you a clear indication of your actual costs.

By tracking your mileage you’ll have a clear account of how much time and money you spend driving for business purposes, and you’ll be due for mileage reimbursement when you file your taxes.