Paid To Drive

by Jessica Flora

How much do you reimburse your employees to drive their personal cars for business use?

Surprisingly, federal law does not require employers to reimburse employees for the use of their personal cars! However, most employers do reimburse employees some amount. Employers who choose to reimburse mileage are generally free to structure that reimbursement plan in any manner they wish.  

The 2015 IRS standard rate is 57.5 cents per mile for business miles driven.

The IRS rate represents the maximum amount at which mileage may be reimbursed without becoming taxable wages. Employers that reimburse at the IRS rate or a lower rate may deduct the reimbursement as a business expense.

The Survey Says

According to a 2015 survey of 146 metro St. Louis and central Illinois businesses conducted by AAIM Employers’ Association, 72% of employers reimburse their employees the current IRS rate. The remaining 28% of employers reimburse an average of 47 cents per mile.

Issues to Consider

Employees who are expected to use their personal vehicles for company business should be required to show proof of current insurance coverage to protect against liability.   

Employers should also consider adding a liability insurance policy as part of their own insurance coverage. This will provide insurance protection against claims that might result from work-related accidents.

Jessica Flora (solutions.team@aaimea.org)  is on the Research and Solutions Team for AAIM Employers’ Association, which helps Missouri and Illinois companies manage their people and processes.