I have an S-Corp. How should I deduct business mileage?

[mtcstle]

I have an S-Corp. I use my personal car for business If I do not reimburtse myself for the expense, milage, how can I deduct this cost from my income? Must I writge myself a check to deduct the milage?"

[mtcstle]

Is a deduction on my personal 1040 limited to amounts over 2% of personal income as suggested by TaxGuyBill? If we claim the deduction on the 1120, must the corporation show a check or other receipt for the payment. The corporation may not have adequate cash here at year's end, to pay for all mileage accrued over the year. Can the corporation offer me something like a debut memo or an IOU, in the short term. The corporation operates on a "cash" basis.

[bwa · Accepted solution]

You do not need to write yourself a check.  You can deduct the mileage or percentage of actual expenses on your own return as a employee business expense the same as any other employee.

Alternatively, the S-Corp could reimburse you and deduct the reimbursement.  If done at the Government mileage rate for only business miles, it wouldn't be shown on your return.  If reimbursed under some other method, you would report the expenses reduced by the reimbursement.

One thing that you can't do is let the S-Corporation claim the mileage, as the S-Corporation doesn't own the car.

[TaxGuyBill]

It is generally best to submit the mileage to the corporation and have the corporation write a check to reimburse you for the expenses using the Standard Mileage Rate.

If you claim the expenses as an employee of the corporation, they are limited to the amount OVER 2% of your income.  If you don't otherwise itemize your deductions on Schedule A, your deduction would further be reduced or eliminated.

[Beth63]

For 2018 taxes employees do not get any expenses

[PeterStonikas]

This is incorrect. The deduction for unreimbursed employee expenses was revoked in TCJA except for a few categories of employment (Armed Force reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses).

If you own the vehicle personally you must reimburse.

https://www.irs.gov/publications/p529#en_US_2018_publink10003917

[IsabellaG]

@PeterStonikas: The previous comments are older answers that related to tax years prior to 2018. They no longer apply, and your answer is correct going forward from 2018.

[marianneallen]

Thank you! I am forming an S Corp in 1/2020 and my biggest tax deduction has always been mileage as I travel approx. 60,000 miles per year for work. Should I also have the corp write me checks for supplies and other related business expenses? 

[Anonymous]

who owns the vehicle, you or S-Corp if you I would recommend reimbursement checks.  If S-Corp here's what the IRS says.  for personal mileage, the cost (can use standard mileage rate) must be added to your W-2 along with gross up for FICA and Medicare taxes.  you can then deduct all vehicle cost on S-Corp.  Alternately to avoid payroll issues you can reimburse for your personal use.        contemporaneous  evidence of mileage regardless of who owns vehicle must be kept.   failure can result in a substantial disallowance if audited.  Don't forget you must tale a salary.     

In addition if you have health insurance - two things.  if the policy is in the name of the corp, then you must add it to your w-2 taxable wages (no fica or medicare taxes)  the S-Corp gets the deduction as part of your wages.  On your 1040 you then get a deduction for the SE Health insurance. IRS notice 2008-1,  failure to do this requires that the corp not take the deduction for your health insurance and no deduction of your personal return.       if the policy is in your name, the IRS requires that the S-Corp reimburse you.  then you proceed as above as if policy in name of corp.    

it is advisable to use a pro the first year.   they can guide you things that you may not be aware of that can affect both you and corp.  

[maidonosis]

I wonder if this should be done monthly, quarterly, or annually when using the standard mileage rate? Or can the s-corp owner pick some frequency they prefer  and write themselves a check for the miles traveled in that period. For example at the end of the year writes one check to cover that year's mileage expenses?

[LindaB1993]

Both of the following methods require expense reports from the employee.(Accountable Plan).

Actual expense reimbursement is not taxable to the employee if you follow your accountable plan and if employees return excess payments within a reasonable time. If the amount of the reimbursement is more than the IRS standard mileage rate for the year, the excess amount is taxable to the employee.

A mileage allowance up to the federal mileage rate is not taxable to the employee if you follow your accountable plan. The employee must pay tax on any payments over the IRS standard mileage limit and on any excess payments they don’t return.

[Deeter]

I made the mistake of not reimbursing, but claiming a deduction on my 1120s for business mileage from 2016 to 2019.

In 2020, my s Corp reimbursed me for that outstanding mileage, using the correct amount for each year.

Can I now list the reimbursed amount as an expense for this year's tax return?  The issue is I already previously listed it as a deduction.

[Deeter]

I made the mistake of not reimbursing, but claiming a deduction on my 1120s for business mileage from 2016 to 2019.

In 2020, my s Corp reimbursed me for that outstanding mileage, using the correct amount for each year.

Do I now list the reimbursed amount as an expense for this year's tax return?  The issue is I already previously listed it as a deduction but never actually did the reimbursement.  My guess is I just don't list it at all?

[JamesG1]

I am assuming that you have now established an accountable plan in your S corp.  An accountable plan is a plan that follows the Internal Revenue Service (IRS) regulations for reimbursing workers for business expenses in which reimbursement is not counted as income.

The reimbursements are ordinary and necessary expenses reported on your S corp.  The reimbursements are not subject to withholding taxes or W-2 reporting on your personal income tax return.

If the 2020 reimbursement is $100, it is reported as a $100 expense on the S corp.  The 2020 reimbursement is not a taxable event for your personal income tax return. 

You can only deduct expenses in the year that you paid for them.  Deductions, income, etc from a previous tax year cannot be claimed with the current year’s tax information.  Assuming that the S corp and personal income tax return are reported on a cash basis, you may claim the expenses in the year that you paid the expenses.

On the personal income tax return, if the original expense had been taken as a deduction, the reimbursement for that expense would be taxable income in the year the reimbursement was received. 

Perhaps you took a 2016 mileage deduction on Schedule A Itemized Deduction of the that year’s tax return.  A reimbursement of that expense in 2020 would be taxable income in 2020.

[sixwiseguys]

Would you just add a category of "Mileage Reimbursement" to the 1120s, or would it go into another category?