What's the benefit to being reimbursed mileage, if it would have been deducted anyway?

I'm trying to wrap my head around mileage reimbursement and taxes.

Example:

MSC reimburses IRS rate ($0.67): I drive 100 miles, receive $67, and don't deduct mileage at end of year.

MSC doesn't reimburse: I drive 100 miles, and $67 gets deducted from my tax bill at end of year.

If there is no difference in the end, then what's the benefit of being reimbursed mileage? Just the fact that you get the cash up front, instead of having your tax bill reduced at end of year? Or am I missing something?

Edited 1 time(s). Last edit at 06/12/2024 09:52PM by whatwhatdb.

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More About Reimbursements

MSC reimburses you .67 per mile for 100 miles and you physically get $67.00. If not, you claim 100 miles on your tax return at .67 cents a mile. This goes off your taxable income so it is $67.00 you don't pay tax on. You don't get $67 in taxes back. You get whatever your tax rate is on the $67.00. So if your tax rate is 22% then you actually get back $14.74.

Edited 1 time(s). Last edit at 06/12/2024 10:10PM by pgilham50.

If you are in a lower tax bracket, the difference may very well be negligible. If you are in a higher tax bracket, your savings could be much more as you reduce your taxable income, hopefully to get you into a lower tax bracket and that is where you will truly save.

Regardless of his tax bracket he's never going to get as much back on taxes as he will with a straight $67 reimbursement from the MSC.

That's not how taxes work. $67 is NOT deducted from your tax bill, it is a reduction in income. The majority of shoppers are not in the 22% tax bracket I will assume, but best case scenario 22%, plus 15.3 percent self employment tax, and lets say another 6% if you are in a high tax state (more if you are in NYC, etc.) So best case scenario 43.3%, and for most shoppers considerably less. So, reimbursement is HUGE.

Edited 1 time(s). Last edit at 06/12/2024 11:18PM by bradkcrew.

Curious to know, which MSC reimburses the IRS rate? I know one MSC used to reimburse for tolls, and another MSC will reimburse for expenses like parking, gas, and transportation. But I don't think I ever worked with a MSC that reimbursed the IRS rate.

@Okie wrote:

I don't think I ever worked with a MSC that reimbursed the IRS rate.

Ditto.

A deduction on your tax return does not equal a reimbursement of that amount! It just lowers your taxable income.

Since the MSC did not ask for receipts, the $67 will be added to your income and you will deduct the 100 miles (or actual mileage). Your deduction for the mileage will depend on the method you use to report business use of automobile.

There are a lot of people out there and don't understand the difference between a deduction and a credit.

Probably picking at nits, but it's not reimbursement, just additional pay.

By definition, the term involves money: "a sum paid to cover money that has been spent or lost."

As mileage is not money, they are not reimbursing me for driving my car, they are paying me for the usage of my car in the performance of their job tasks.

Have synthesizers, will travel...

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What's the benefit to being reimbursed mileage, if it would have been deducted anyway?

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