Keeping track of travel expenses and proactively reducing them is tough work. Taking steps like moving your travel program from unmanaged to managed, centralizing a platform where travelers can book and manage their travel, and providing visibility for travel managers are all good places to start. But there may be more opportunities to curb or predict spend.
That’s where mileage reimbursement policies come in. Business travel by car is often overlooked, but paying back your employees for the miles they drive and the gas they buy empowers them to focus on building connections at their destination instead of the personal financial impact of how they’re getting there. Done right, mileage reimbursement increases employee satisfaction and businesses can even get tax deductions for paying out employees.
Here’s why every company with business travelers hitting the road (literally) should consider adding mileage reimbursement guidelines to their travel policy.
Mileage reimbursement is the concept of paying back business travelers when they pay for gas out-of-pocket, even though they’re driving for work-related reasons. If travelers rent a car on your travel management platform or even have a corporate car, they still have to swipe their personal cards at the pump.
A mileage reimbursement policy, as part of a larger corporate travel policy, outlines what mileage qualifies for reimbursement, how employees should track their miles, and how to expense the miles for payment.
Including mileage reimbursement policy to your travel program will not only help ease your organization’s tax burden, but also give visibility for planning corporate travel spending for the year. Expense reports that roll in unexpectedly, weeks after the trip ends, can make it difficult to forecast how much your organization will spend on T&E. Standard reimbursement rates provide a much-needed grasp on one of a business’s most significant line items.
Mileage reimbursement involves the IRS because mileage reimbursement payments do not count as employee income and is therefore not subject to tax withholding. The IRS therefore sets mileage reimbursement rates every year to make it easier to calculate reimbursements.
In 2019, the IRS standard mileage reimbursement rate was 58 cents per mile. The rate adjusted for 2020 is 57.5 cents per mile, taking into account oil and gas prices, inflation, economic conditions, and the cost of car ownership into calculating the reimbursement rate.
Regardless of the nitty-gritty details of your organization’s mileage reimbursement policy, make sure the policy is thorough, easy to understand, and easily accessible with your existing corporate travel policy.
Looking to refresh your corporate travel policy? Before adding a mileage reimbursement policy, check out our ebook on avoiding critical corporate travel policy oversights.