Handling mileage reimbursement when using actual expenses method

[dogleg]

Say as an independent contractor, I choose the actual expenses method for my mixed personal-business use vehicle. Then, maybe next year (I am now locked into the actual expenses method), one client reimburses my mileage at the standard IRS mileage rate. Do these reimbursed miles still count as business miles in determining the % of business use of the vehicle (thus affecting my actual expenses deduction)? And is the reimbursement now taxable (regular income)?  I cannot find an answer in Publication 463 or Form 4562 instructions. Thanks.

[AnnetteB6 · Accepted solution]

The business miles you drove are still considered business miles whether or not you are reimbursed for some of them.  

As an independent contractor, the reimbursement you receive is considered to be 'other' income for your business.  You would include the miles as business miles and deduct any expenses based on your percent of business use.  These deductions will help to offset the additional income you received as mileage reimbursement.  Claiming actual expenses, you may break even based on the reimbursement or have some extra income or extra deductions depending on your total vehicle expenses.