Can employees deduct vehicle expenses?

Modified on Sun, 05 Feb 2023 at 08:15 PM

Up until 2017, people who itemized their deductions could claim private car usage as an employee business expense deduction under Schedule A. Then, the Tax Cuts and Jobs Act suspended miscellaneous itemized deductions for tax years after December 2017 making vehicle expenses no longer applicable (source). 

While you can’t get a tax deduction, that doesn’t mean there aren’t other ways to recoup this cost. People who drive their own car for work-related activity can typically seek reimbursement from their employers.

Mileage Reimbursement

Most employers will reimburse employees for private vehicle usage by paying them for each mile driven using the IRS standard mileage rates:

  • 58.5 cents for the first half of 2022 
  • 62.5 cents for the second half of 2022

Generally, an employee will fill out an expense form and submit it to their employer. The company will then review the reimbursement request and then determine if it should be approved.

Every company can make its own rules about what qualifies for reimbursement. In most circumstances, travel to meet with clients or pick up parts is acceptable. However, normal commuting (i.e., driving to work from your house) or making personal stops during a business trip won't count.

Note that this reimbursement is not taxable. However, if the employer decides to pay their employees above the standard mileage rate, then the additional amount above the standard mileage rate would be considered taxable income.

Does an Employer Have to Reimburse Me for Mileage?

There is no federal requirement that an employer must reimburse employees specifically for personal vehicle usage related to company purposes. However, there is a federal law that says all employers must reimburse employees for any work-related expense to a point. This could include private vehicle usage or other job-related costs such as uniforms or travel accommodations (flights, hotel, etc.).

For more information, please see IRS Publication 463: Travel, Entertainment, Gift, and Car Expenses

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