Given that no comprehensive data or publication exists that tracks the rates employers use for gas reimbursements and the lack of disclosure of this type of information in the private sector, it’s nearly impossible to calculate the average rate of reimbursement for gas mileage. However, by using the information that’s available for federal government employees along with some of the published tax guidance on employer reimbursements, you’ll likely conclude that the average reimbursement is close to the federal standard mileage rate given all the incentives for employers to use it.
Influence of Tax Rules
As a result of the lengthy tax rules governing employee car expense reimbursements, employers generally establish similar reimbursement rates that minimize the amount of employment taxes they'll need to pay, that can be accounted for easily and that reduce the income tax employees may need to pay on their reimbursements. In general, federal tax rules allow employers to exclude gas reimbursements from the wages of their employees, provided that each employee who receives a payment actually incurs a gas expense. If this basic condition is satisfied, employers may not have to treat the reimbursement as taxable wages on employee W-2 forms, which would increase employee income tax bills and the amount of Social Security, Medicare and federal unemployment tax that employers pay.
To simplify the accounting process, the tax rules allow employers who implement an “accountable plan” to treat most gas reimbursements and allowances as a deductible travel expense rather than as employee wages. An accountable plan is a policy enforced by employers that requires you to submit receipts for every car expense -- not just for gas -- and to return any portion of a reimbursement that’s more than what you actually pay.
Federal Mileage Rate
Most employers will reimburse employees for gas and other car expenses using the IRS standard mileage rate. The standard mileage rate is a fixed amount that’s intended to cover the cost of gas, oil and all other car expenses for each mile you drive. The incentive to employers to use the standard mileage rate is that they don't have to collect, record and file the receipts you'd ordinarily submit when the standard rate isn't used. It also allows them to automatically treat reimbursements as a deductible travel expense on their books rather than have to record them as wages for each employee.
Actual Car Expenses
If your job requires extensive travel and frequent use of your personal vehicle, your employer may choose to cover your actual expenses instead of using the standard mileage rate. Provided there is an accountable plan in place, reimbursements of actual gas and other car expenses can also be deducted by employers as a travel expense and remain tax-free to you. In this case, however, you’ll need to submit receipts for all your car expenses, which can include gas, oil, insurance premiums, parking and garage fees, repairs, the cost of replacing tires, and additional amounts for wear-and-tear on the car or part of your monthly lease payment. For example, if your employer sends you on a three-day business trip and provides you with a gas allowance in advance of $60, but your actual gasoline purchases only total $50, the accountable plan requires that you submit the receipt and return $10 to your employer.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.