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lakenall
Level 1

My wife is reimbursed for driving her personal car for work. Does the reimbursement count towards wages earned?

 
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DawnC
Employee Tax Expert

My wife is reimbursed for driving her personal car for work. Does the reimbursement count towards wages earned?

It depends on the status of the plan she is reimbursed from, specifically whether or not the plan is considered an accountable plan.  Your employer may reimburse you for using your car at work, but, if the payments aren’t made pursuant to an accountable plan, your employer has to include them on your W-2.  As a result, the reimbursements will be reported on your tax return in the same way as your wages.

 

To be an accountable plan, the employer's reimbursement or allowance arrangement must include all of the following rules:

  1. Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.

  2. You must adequately account to your employer for these expenses within a reasonable period of time.

  3. You must return any excess reimbursement or allowance within a reasonable period of time.

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3 Replies
DawnC
Employee Tax Expert

My wife is reimbursed for driving her personal car for work. Does the reimbursement count towards wages earned?

It depends on the status of the plan she is reimbursed from, specifically whether or not the plan is considered an accountable plan.  Your employer may reimburse you for using your car at work, but, if the payments aren’t made pursuant to an accountable plan, your employer has to include them on your W-2.  As a result, the reimbursements will be reported on your tax return in the same way as your wages.

 

To be an accountable plan, the employer's reimbursement or allowance arrangement must include all of the following rules:

  1. Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.

  2. You must adequately account to your employer for these expenses within a reasonable period of time.

  3. You must return any excess reimbursement or allowance within a reasonable period of time.

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**Mark the post that answers your question by clicking on "Mark as Best Answer"
AmeliesUncle
Level 13

My wife is reimbursed for driving her personal car for work. Does the reimbursement count towards wages earned?

Generally, if your wife submitted her mileage to her employer and the employer "reimbursed" her based on those specific miles, it is a tax-free arrangement (an "Accountable Plan").

 

If the employer did not do that (such as giving her a flat amount or some other method not based on mileage that she submitted), it is taxable wages.  Her employer should have included that on her W-2.

 

So either way, you don't need to do anything when preparing your taxes to report that income. 

 

In the event it was NOT an "Accountable Plan" (it was taxable and added to her W-2) or if the Accountable Plan reimbursement was less the IRS maximum, you MIGHT be able to get a deduction for that expense.  It is no longer deductible on the Federal return, but some States still allow it as a deduction (but it is usually subject to limitations, so it still may not benefit you). 

Irene2805
Expert Alumni

My wife is reimbursed for driving her personal car for work. Does the reimbursement count towards wages earned?

Both AmeliesUncle and DawnCO are correct.  To summarize:

 

  • If your wife is reimbursed under an Accountable Plan where she submits the mileage and gets reimbursed, it is nontaxable and not included as her wages.  You do nothing.

 

  • If she gets a flat amount, it is included in her wages, the employer has already done this and it should be included in Box 1 of the W-2.  You do nothing (but enter the W-2).

 

  • Let's say that your wife's out-of-pocket travel expenses exceeded the reimbursement from the employer.  Enter the excess as an employee expense on your tax return.  It will not be deductible on the federal return, but will flow to the state return and it might be allowed there.  [Don't forget to include any reimbursed tolls or parking fees in addition to the mileage.]

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