Small business owners and self-employed individuals can use the standard mileage rate set by the Internal Revenue Service to calculate the tax-deductible costs for using a vehicle for business purposes. Alternatively, taxpayers may keep track of actual expenses of operating a vehicle although the IRS will require “adequate records or other sufficient evidence.” Most use the standard mileage rate since it involves less recordkeeping.
To claim the standard mileage rate, taxpayers must keep track of the actual number of miles driven and the business purpose. Many write mileage information in a notebook, mobile app or software program, then multiply the number of miles driven by the applicable IRS standard mileage rate, to determine the mileage deduction or reimbursement.
The standard mileage rate is often used by employers to reimburse employees who use their personal vehicles for the employer’s business. Any reimbursement to the employee should not be treated as taxable income to the employee. If the employer does not reimburse the employee for business use of a personal vehicle, then the employee may be able to deduct the unreimbursed expense on his or her Form 1040, Schedule A, although then the employer cannot claim the deduction.
But be careful: if you fail to reimburse an employee for mandatory use of their personal vehicle for work related purposes, you are almost certainly violating California law, which may expose you to heavy monetary penalties.
Effective January 1, 2015, the standard mileage rate for the use of a vehicle is:
- 57.5 cents per mile for business use
- 23.5 cents per mile driven as medical or moving expenses
- 14 cents per mile driven for charitable purposes
Please check with your Labor/Employment attorney if you have any questions with these requirements.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
