When thinking about taxable income, most mobile workers immediately wonder how much money they’ll owe the IRS each year. This can be confusing and overwhelming. After all, there are several things the IRS classifies as taxable income, including things like lottery winnings and jury duty fees. But there’s a silver lining; taxable income can be reduced, especially when it comes to mileage reimbursement.
Here at Motus, we understand that taxable income is a tricky thing to wrap your head around. But we’re here to help break it down for you so you have a better idea of how taxable income works with the Motus program.
In a nutshell, if you meet all the IRS guidelines, you won’t be subject to tax implications for your mileage reimbursement. Often times, mobile workers on the Motus program meet all requirements with the exception of one: vehicle age (i.e. “the model year of the vehicle you’re driving for work needs to fall within the number of model years in your retention period”).
The main question we hear when someone is out of compliance with this guideline is, “do I need to buy a new vehicle to avoid taxable income on my reimbursement”? The answer is no, purchasing a new vehicle isn’t the only solution to avoiding taxable income. It all depends on how many miles you’ve driven. In other words, if you drive a certain number of business miles and your Motus reimbursement is lower than what the IRS considers tax-free, then you wouldn’t be subject to tax at all. We know this can be confusing, so let’s dive in with an example:
In this example, John’s eligible to receive all of his reimbursement tax-free, since his total Motus reimbursement ($595.68) falls well within the range of what the IRS considers eligible for tax-free status ($817.50).
We hope this fictional example gave you a better idea of how the taxable portion of your reimbursement could potentially go away, and why it’s so important to submit your miles on time every month.
Still have questions about your reimbursement or the Motus program?