Do you need to drive your own car to carry out your job function? If so, your employer may reimburse you for the cost of driving your own vehicle. Transportation to and from your place of employment is not reimbursable. 

Employee Reimbursement for Using Your Own Vehicle

Employee reimbursement for using their own automobile will vary somewhat by employer and sector, but most organizations compensate employees at approximately the Standard Mileage Rate set by the IRS or the Privately Owned Vehicle Reimbursement Rate determined by the GSA.

The IRS rate is currently (2015) set at 57.5 cents per mile traveled up from 56 cents in 2014.  The GSA rate is also set at 57.5 cents for 2015 (though the IRS and GSA rates are not always set at an identical level).

Government Employee Reimbursement

Government employees will always be reimbursed at exactly the GSA rate if the use of a privately owned automobile is authorized or when there is no government vehicle is available.  If a government-owned car is available, then the reimbursement will be 23 cents per mile. 

Employee Automobile Expense Reimbursement

Most employers will reimburse at the IRS or GSA rate since they can deduct up to that amount as an expense when they file their corporate income tax return.  There are other complex tax formulas that employers can use.  

If your employer is reimbursing at or near the GSA or IRS rate, then you can feel assured that you are getting a fair deal.  If you are receiving less than the IRS rate, then you may be able to deduct some of the expense on your personal income taxes.

 

Tax Consequences

Mileage allowances are considered tax-free disbursements by employers.  However, your employer cannot directly pay for operating costs like repairs or maintenance for your car without tax consequences. Other expenses like tolls directly related to business transportation can be reimbursed without taxation with receipts.

Consult your tax accountant for advice if you are uncertain of how the regulations apply to your situation.

Suggested Reading: How to Calculate Mileage Expenses for Business | How to Deduct Car and Truck Expenses for Taxes