Can You Claim Mileage on Taxes if Not Self-Employed?

For most employees, the ability to deduct mileage on federal taxes is no longer an option. A change in tax law altered how unreimbursed business expenses are treated, making employer reimbursement the primary way for employees to recover vehicle-related costs. While the federal deduction has been eliminated for most W-2 employees, some exceptions exist at the federal and state levels.

The General Federal Rule for Employees

The Tax Cuts and Jobs Act of 2017 (TCJA) suspended the deduction for unreimbursed employee business expenses. This eliminated the miscellaneous itemized deduction that employees previously used to claim costs their employer did not cover, including mileage for driving between job sites, visiting clients, or attending off-site meetings. The suspension began in tax year 2018 and is currently slated to remain in effect through 2025. As a result, W-2 employees cannot deduct the costs of using their personal vehicle for work on their federal tax returns.

Federal Exceptions for Specific Employee Categories

Despite the broad suspension, federal law provides exceptions for a few specific, narrowly defined categories of employees. Individuals in these groups can still claim unreimbursed mileage as an adjustment to income or as an itemized deduction, depending on their category.

Armed Forces Reservists

Members of the Armed Forces reserves can deduct unreimbursed travel expenses for performing their duties. This deduction applies to travel that is more than 100 miles away from home and involves an overnight stay. These expenses are claimed as an above-the-line deduction, meaning the taxpayer does not need to itemize to benefit from it.

Qualified Performing Artists

Qualified performing artists represent another exception. To qualify, an individual must have performed services for at least two employers in the performing arts during the tax year, receiving at least $200 from each. Their related business expenses must also exceed 10% of their gross income from performing, and their total adjusted gross income cannot exceed $16,000 before deducting these expenses.

Fee-Basis State or Local Government Officials

Fee-basis officials, who are compensated entirely or partially on a fee basis for government work, can deduct their work-related expenses. This category includes public notaries or clerks paid per service rather than receiving a salary. They can claim these deductions above the line on their tax return, which reduces their adjusted gross income without the need to itemize.

Employees with Impairment-Related Work Expenses

Employees with physical or mental disabilities can deduct impairment-related work expenses, which are costs necessary to allow them to work. If an employee with a disability requires special equipment or modifications to their vehicle to commute or perform their job, those costs may be deductible as a business expense.

State-Level Mileage Deductions

The TCJA changes apply at the federal level, but state tax laws do not always follow the federal code. Some states have not conformed to the federal suspension of the deduction for unreimbursed employee expenses. In these states, employees may still be able to deduct work-related mileage on their state income tax return by completing specific state-level forms. Because state laws can change, employees should review their specific state’s tax regulations each year to determine eligibility.

Employer Reimbursement as an Alternative

With the federal tax deduction unavailable, employer reimbursement is the most common method for employees to recover mileage costs. The tax treatment of these reimbursements depends on whether the employer uses an accountable or non-accountable plan.

An accountable plan is a reimbursement arrangement that meets specific IRS requirements. To qualify, the expenses must have a business connection, the employee must adequately account for the expenses to the employer, and the employee must return any excess reimbursement. When an employer uses an accountable plan to reimburse mileage, the payments are not considered income and are not subject to income or employment taxes.

Conversely, if a reimbursement plan does not meet these requirements, it is considered a non-accountable plan. Under this plan, all reimbursements are treated as taxable wages. This means the payments are added to the employee’s regular income, reported on their Form W-2, and are subject to federal income tax, Social Security, and Medicare taxes.