The IRS has created an employee mileage reimbursement rate for employees who drive their diesel and petrol cars for work purposes. These rates have been created to act as a guideline for businesses. They also help create an opportunity for a tax deduction for employees.
Chances are, you already know the petrol and diesel IRS reimbursement rates like the back of your hand. However, with electric cars, how do you go about reimbursing employees?
If you’re interested in learning about electric car business allowances, we created a complete guide to show you how to decide an electric car mileage allowance for your business. Keep reading to learn more!
Policy considerations for mileage reimbursement
If you’re considering adding an electric vehicle to your fleet, one of the challenges that you can expect to see is the price difference between an electric car and a gasoline vehicle.
Gasoline vehicle manufacturers have had many years to streamline the development of a car that runs on gasoline. While electric car manufacturers haven’t had the same process to develop cheaper alternatives to use in their electric vehicles. This is why the most expensive part of an electric vehicle is the battery.
As demand for electric cars increases, there’s an increase in demand for precious raw material such as lithium, that goes into the battery that powers the electric car. This is what causes electric vehicles to be much more expensive than gasoline vehicles.
However, electric vehicle drivers can charge their cars from home, and even have the facility to charge stations at gas stops. This availability of charging stations is what makes electric cars a dependable option for both commuters and long-distance travelers.
There isn’t an official electric vehicle mileage reimbursement rate set by the IRS yet. However, if you were looking to introduce electric vehicles into your fleet, several government incentives can be offered to your organization for using an electric car.
Deciding how to reimburse your employees for their electric car mileage can be tricky. But there are several different ways that you can choose to cover the cost of business traveling.
The "cents per mile rate" reimbursement option is the easiest to use, as this type of reimbursement program reimburses employees not only for the miles that they drive but also covers the depreciation of their vehicles and registration costs.
The difficulty that you may run into is that the majority of reimbursement calculators online are tailored to vehicles that are powered by gasoline. Due to the cost savings of using an electric car, keep in mind that you may end up overpaying on reimbursements if you use an online calculator for mileage allowances.
For example, the average cost to drive an electric vehicle for one year, or 15,000 miles, is $540. If a gasoline-powered car were to operate at the same number of miles in one year, it would cost a gasoline-powered vehicle $1,400.
Deciding electric car mileage reimbursement rates for your business is a great way to encourage your employees to switch over to using electric cars. This, in turn, can help your organization to save money on fuel costs.
Countless benefits to encouraging your employees to use an electric car, however, deciding the electric car mileage reimbursement rate for your organization depends on what you think is a fair rate and what your company can afford.
Are you interested in using a mileage tracking and reimbursement software for your business? Click here to schedule a quick demo with Fyle, to help us put an end to your expense management challenges.