Do you frequently travel to potential customers, to suppliers, or even to a warehouse? If so, are you currently reimbursing yourself for mileage? Although a majority of ecommerce operations are online, there are still reimbursable opportunities for travel to and from certain locations.
Reimbursing yourself for these expenses not only helps lower your business’s taxable income, but also gives you extra cash back in your pocket. In this article, we’ll cover the 2024 gas mileage rate, discuss what qualifies for mileage, and go over some mileage best practices.
If you have specific questions about what mileage reimbursements look like for your business, contact an ecommerce CPA near you.
The 2024 Gas Mileage Rate
The 2024 gas mileage rate is set at $0.67 per mile. This is up from $0.655 per mile in 2023. As a result, ecommerce business owners can reimburse themselves or employees up to $0.67 per mile in 2024. The IRS has not yet released the 2025 gas mileage rate.
What Qualifies for Mileage
Mileage is only reimbursable for business-related travel. According to the IRS, eligible business mileage involves traveling between two places of work, regardless of whether those workplaces are temporary or permanent. This means that traveling to the grocery store to buy personal items would not qualify. Here are some examples of eligible travel:
- Traveling from your ecommerce office to a warehouse.
- Traveling from your ecommerce office to a client meeting or location.
- Traveling from your ecommerce office to a supplier.
- Any other travel from your ecommerce office to another destination for business purposes.
The flexibility of running ecommerce operations has led many owners to work remotely. Any place where you are conducting business is considered your work location. For example, if you are in Florida visiting an ecommerce supplier, travel from your hotel room to the supplier would be eligible mileage. If you are unsure of a specific scenario, contact an Amazon FBA CPA or a Shopify CPA.
The Taxability of Gas Mileage
Qualifying reimbursements are tax-free to the recipient and are tax-deductible on your business return. Let’s say you have $150 of mileage for the month. Your business will pay you the $150, which is tax-free to you. In addition, your ecommerce business is able to take a tax deduction for the $150 reimbursement, helping lower taxable income.
Mileage Best Practices
When it comes to issuing reimbursements for gas mileage, there are a few best practices to keep in mind. Following these tips helps generate accurate bookkeeping for Shopify and Amazon businesses.
Have an Accountable Plan
The first best practice is to have an accountable plan in place. An accountable plan outlines eligible business reimbursements, the process for issuing reimbursements, and the type of documentation needed.
If the IRS were to request information surrounding your reimbursement policies, having an accountable plan is crucial. Reach out to a CPA for Amazon sellers or a Shopify accountant to draft your ecommerce accountable plan.
Run Reimbursements Through Payroll
Next, run all reimbursements through payroll. Even though your reimbursements are tax-free, it’s important to have some type of tracking method, which is easily done on paystubs. When running payroll, you will generally be able to add a dollar amount for reimbursements.
If you do not handle your own payroll, reach out to your ecommerce accounting services provider and inform them about the reimbursement.
Record Reimbursements Separately
In your general ledger, have a separate account that holds reimbursements. This helps you track how much your company has paid toward gas mileage and can be useful from a planning standpoint. When you file your business tax returns, reimbursements may be grouped in with wages or employee benefits.
Have Supporting Documentation
Finally, have the proper documentation to back up the reimbursements you issue to yourself and employees. This includes a detailed time log of the location traveled to, the reason for travel, the date of travel, and the number of miles driven.
This information needs to be on file for each reimbursement. The good news is that there are a variety of software programs that can track this information for you.
The Bottom Line
Gas mileage reimbursements at the 2024 rate of $0.67 can be a great way to pull tax-free money from your business and lower your business’s taxable income. However, having the right accounting controls in place is important to avoid the IRS disallowing your reimbursements. For more information on how your business can get started issuing reimbursements, contact one of our accountants for Amazon sellers or our expert Shopify CPAs today.
