A Guide to the Business Mileage Deduction Requirements
The business mileage deduction is important in reducing a company’s tax bill. Business mileage is when you travel with your personal vehicle for business, medical, charity, or moving purposes. In any of these cases, you will be reimbursed by your employer according to the miles traveled.
Business mileage deduction is a term used by the IRS to refer to the deductibility of these expenses. It is important to note that the standard business mileage deduction rates may be different for every year. This article will provide you with the essential information that you need to know about business mileage deductions and reimbursement requirements.
The Current Standard Business Mileage Deduction Rates
Starting on January 1, 2019, the standard mileage rates for the use of a car – whether it’s a van, a pickup, or a panel truck – are as follows:
– 58 cents per mile driven for business use, which is 3.5 cents more than the rate for 2018
– 20 cents per mile driven for medical or moving purposes, which is 2 cents more than the rate for 2018
– 14 cents per mile driven in service of charitable organizations
Before you can claim your business mileage deduction, you need to provide the IRS with documentation filled with necessary details, including:
– Your mileage
– The dates of your business trips
– The places you drove for business
– The purpose of your trips
– The total number of miles you drove during the year, including business, commuting, and personal purposes.
If you have an accurate mileage log, the IRS will grant your business mileage deduction. If not, the IRS may deny your deduction, and you might have to pay for penalty fees as well.
Business Mileage Deduction and Reimbursement Requirements
When it comes to mileage reimbursement, there are no specific requirements that you have to follow. For example, you may use your own car for work and your employer may not have to give you any reimbursement. That being said, many organizations offer a mileage allowance or mileage reimbursement as a way to attract and retain good employees. Depending on the company, some may also offer gas reimbursement or other allowances instead of only mileage reimbursement. This is as long as they comply with what is known as an accountable plan, which is a plan that follows IRS regulations for reimbursing employees for business spendings. The requirements for an accountable plan is as follows:
– Relates to business
– Requires solid evidence
– Excess amounts are returned in a timely manner.
If your mileage plan meets these requirements, then it is highly likely that you won’t need to pay income taxes on it. However, you cannot have it both ways and take a business mileage deduction for personal expenses, too. If the expenses are not part of an accountable plan, your employer will include them on your W-2, meaning that the expenses are subjected to income taxes just as you would wages. As for your business mileage deduction, you can get your deduction at a standard mileage rate for the year.
The matter of mileage allowance and reimbursements can be complicated depending on each individual’s situation. To make sure that you will get your business mileage deduction, your mileage log should be as accurate as possible.
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