This is Part 2 of 2 outlining the government’s regulations about mileage reimbursement. This week I am discussing the IRS’ regulations for mileage reimbursement.
As I have mentioned previously, instead of having to navigate aimlessly through the government’s documents… let me do the hard work for you. Below is the “need to know” about mileage deduction according to the US government.
The IRS says,
“Deductible Car and Truck Expenses
Ordinarily, expenses related to use of a car, van, pickup or panel truck for business can be deducted as transportation expenses. Use of larger vehicles, such as tractor-trailers, is treated differently and is not part of this discussion. In order to claim a deduction for business use of a car or truck, a taxpayer must have ordinary and necessary costs related to one or more of the following:
Traveling from one work location to another within the taxpayer’s tax home area. (Generally, the tax home is the entire city or general area where the taxpayer’s main place of business is located, regardless of where he or she resides.)
Visiting customers.
Attending a business meeting away from the regular workplace.
Getting from home to a temporary workplace when the taxpayer has one or more regular places of work. (These temporary workplaces can be either within or outside taxpayer’s tax home area.)
Expenses related to travel away from home overnight are travel expenses. These expenses are discussed in Chapter One of Publication 463, “Travel, Entertainment, Gift, and Car Expenses.” However, if a taxpayer uses a car while traveling away from home overnight on business, the rules for claiming car or truck expenses are the same as stated above.
It is important to note that costs related to travel between a taxpayer’s home and regular place of work are commuting expenses and are not deductible.
Taxpayers can choose to use either the standard mileage rate or actual expenses to compute their allowable business deduction. They may want to figure the deduction using both methods to see which provides a larger deduction.
Standard Mileage Rate Method
The standard mileage rate may be used to figure the deductible costs of a vehicle that is owned or leased. If a taxpayer wishes to use the standard mileage rate for a leased vehicle, it must be used for the entire lease period. In other words, a taxpayer must use the standard mileage rate for the first year a vehicle is available for business use in order to use the standard mileage rate in subsequent years.
The standard mileage rate is adjusted annually by the IRS to reflect changes in the cost of operating a vehicle. In some situations it is adjusted during the year. The 2006 standard mileage rate of 44.5 cents per mile, as well as rates for previous periods, can be found at http://www.irs.gov/taxpros/article/0,,id=156624,00.html
The standard mileage rate is used in place of actual expenses. Taxpayers who choose the standard mileage rate may not deduct actual expenses, such as depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration fees. Business-related parking fees and tolls may be deducted in addition to the standard mileage rate. Fees for parking at a taxpayer’s main place of business or tolls related to commuting to and from that main place of business are personal expenses which are not deductible.
Actual car or truck expenses include:
Depreciation, Lease payments, Registration fees, Licenses, Gas, Insurance, Repairs, Oil, Garage rent, Tires, Toll, and Parking fees
These and other expenses are discussed in detail beginning on page 16 of Publication 463. If business use of the vehicle is less than 100 percent, expenses must be allocated between business and personal use. Only the business use percentage of each expense is deductible.”
If you needed more information please contact the Internal Revenue Service (IRS). Also, consult your financial advisor or accountant for your specific company processes as they may be different from what the government is offering.
- Ashton Byrne, Marketing Coordinator for Quino Solutions Inc.
Do you deduct your mileage? Do you know all the details you need to know about logging your mileage? Most of us don’t and the government doesn’t make it easy to find the details. Therefore, instead of having to navigate aimlessly through the government’s documents… let me do the hard work for you. Below is the “need to know” about mileage deduction according to the government. There is a link at the end of this post for your own reference.
The CRA (Canadian Revenue Agency) says,
“Motor Vehicle Expenses
3. Where a “motor vehicle” is used by an individual in a taxation year partly to earn business income and partly for personal use, the deductible amount is normally that proportion of the aggregate of the
(a) total operating expenses of the vehicle incurred by the individual in the year,
(b) capital cost allowance, and
(c) interest
that the distance traveled by the vehicle to earn the business income is of the total distance traveled by the vehicle for the year. For example, where the aggregate of (a), (b) and (c) as described above for a year is $8,000 and the total distance traveled for the year is 32,000 kilometres of which 24,000 represent business use, the deductible amount is $6,000 determined as follows:
(24,000 ÷ 32,000) × $8,000 = $6,000
4. Should an individual own or lease two or more “motor vehicles” used partly for business purposes and partly for personal purposes, the above calculation may be applied separately for each vehicle or, for convenience, the calculation may be applied for both or all the vehicles taken together. That is, the operating expenses, capital cost allowance and interest (see 5, 13 to 20 and 21 below) for each “motor vehicle” may be combined and the deductible amount determined on the basis of the ratio of combined distance traveled for business purposes to combined total distance traveled, provided the result so determined is reasonable and not materially different from that where the determination is made for each vehicle.
5. The term “operating expenses” referred to in 3(a) above includes the cost of fuel, maintenance (for example, car washes, grease, oil and servicing charges), repairs (other than accident repairs-see 7 below), licenses, insurance and, except as noted in 6 below, “eligible” leasing costs (see 9 to 12 below), less the aggregate of all rebates or other amounts (except where used to calculate the “eligible” leasing cost) received or receivable by the individual for the expenses and not included in the individual’s income.
6. Where an individual, who leases a “motor vehicle” on a long-term basis but is not entitled to claim capital cost allowance on it, makes frequent use of the vehicle during normal work hours for business purposes, but the distance traveled for that purpose is comparatively low, the “eligible” leasing cost (see 9 to 12 below) for that vehicle may be excluded from the operating expenses if the individual so requests and the circumstances warrant it. The “eligible” leasing cost is then apportioned on the basis of a reasonable combination of distance traveled and time the “motor vehicle” was used for business purposes. For example, if a “motor vehicle” were used for business purposes five days out of seven in a normal work week, it might indicate that (allowing for personal use in the evening, usual holidays, time off for sickness, etc.) it was used 65% of the time for business purposes. If, on a distance-traveled basis, the vehicle were used only 25% for business purposes, combining the two factors might suggest that 45% of the “eligible” leasing cost should be attributed to business use. However, where a “motor vehicle” is used infrequently for business purposes, the apportionment must be on the distance-traveled basis alone, even though the vehicle is available at all times for business purposes.
7. Accident repair expenses, whether incurred to repair damages resulting from the accident to a “motor vehicle” driven by the individual or to the property of others, are deductible in full if the vehicle was being used for business purposes at the time of the accident. Any amount deductible is net after recoveries through insurance or damage claims. No portion of such expenses is deductible if the vehicle was being used for personal purposes at the time of the accident.
8. To be deductible, “motor vehicle” expenses must be reasonable in the circumstances and supportable by vouchers. (The vouchers need not be filed with the individual’s income tax return; however, they must be retained for examination on request.) A claim by an individual for “motor vehicle” expenses calculated on a cents-per-kilometre (mile) basis is not acceptable. To support a claim where a “motor vehicle” is used in part for business purposes and in part for personal purposes, a record should be kept of total distance traveled and distance traveled for business purposes in a year. The record should contain at least the date, destination and distance traveled for each trip.” http://www.cra-arc.gc.ca/E/pub/tp/it521r/it521r-e.html
If you needed more information please contact the Canadian Revenue Agency (CRA). Also, consult your financial advisor or accountant for your specific company processes as they may be different from what the government is offering.
FYI: This post is part 1 of 2 that will outline exactly what the government says about deducting your mileage. Next week I will post the details for mileage deduction according to the IRS (Internal Revenue Service).
Hope this helped 
-Ashton Byrne, Marketing Coordinator for Quino Solutions Inc.
There are numerous ways to bill for your travel time. Here are some strategies other business professionals are using:
- “Don’t charge for airfare, lodging, rental cars or meals UNLESS it’s an unusual engagement where you will be on-site for days or weeks at a time.” –Greg Brooks of West Third Group
- “Submit an expense report to [your client] for mileage per trip. It is one of the conditions of the rate per consultation.” –Kevin Johnson of KEVIECO LLC
- “Work [out] the details during the pre contract negotiations…adding costs after they are closed can become an embarrassing issue.” –Andy Hamer of New Mindset Business Consultants
- “Do not charge for local – commuting travel, build it into your rates. Do not charge for commuting mileage either, but keep track for tax purposes. However, for out of town travel (travel in excess of two hours) you must negotiate that up front.” – Kathleen Schneibel (Entrepreneurial Accountant)
There are other ways to bill your travel time; however, the answers above are only a few suggestions by business professionals.
If you would like to see the discussion which sparked this blog post click here
If you have another strategy that I didn’t add above leave a comment and tell everyone how you bill for travel time… lets help each other out.
-Ashton Byrne, Marketing Coordinator at Quino Solutions Inc.
YES
The IRS issues the maximum rate allowed for reimbursement, whether or not a company adheres to that rate is the company’s decision. There could be three situations:
1. An employer has a lower rate than the IRS.
What does that mean for you?
- You are not getting “jipped;” but you should claim the difference as an expense.
2. An employer has the same rate as the IRS.
What does that mean for you?
- Most employers should ask you to keep records for the company’s tax purposes.
3. An employer has a higher rate than the IRS.
What does that mean for you?
- You should claim the difference as income. In addition to keeping records for tax purposes.
The answers above should also pertain to the Canadian Revenue Agency for those Canadian readers.
*If you have any questions or concerns about mileage reimbursement rates please contact your company financial administrator, the IRS, or the CRA. Quino Solutions is not responsible for the reimbursement of any mileage expenses.
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