What Is the Standard Policy for Mileage Reimbursement to & From the Airport for a Small Business?

If air travel is an unavoidable expense for your small business, a deduction for the mileage you put on your car driving to and from the airport is ordinarily deductible. This is true even when employees do the driving and you reimburse them for the mileage put on their cars. There isn't a standard policy you have to follow, but the way the deduction is reported will depend on the reimbursement policy your business does follow.

Whether you reimburse your employees' actual car expenses for driving to and from the airport, such as the amount they pay-out-of-pocket to fill up their gas tanks, or use the standard mileage rate -- a fixed rate set periodically by the Internal Revenue Service for each business-related mile driven -- you can always deduct the payments as a business expense. The deduction is reported as a travel expense when your company's standard policy is to make reimbursements under an “accountable plan,” as defined by the IRS. If the reimbursement policy doesn't qualify as an accountable plan, all mileage reimbursements, not just those covering airport travel, are deducted as employee wages.

The IRS requires your reimbursement policy to impose three requirements on employees to be considered an accountable plan. The first requirement is that the reimbursements must only cover business-related expenses -- which, in the context of mileage related to the airport, requires your employees to be flying for a job-related reason. The second requirement is that the policy must require employees to adequately account to you for their actual mileage expenses. This requirement is automatically satisfied if your plan uses the standard mileage rate to reimburse employees who drive their own cars to the airport. The third requirement is that the policy must insist that employees return excess reimbursements, such as when you pay them in advance and the amount paid turns out to be more than expense. When mileage reimbursements are made this way, payments are tax-free to your employees.

If your business's policy doesn't qualify as an accountable plan, you must treat reimbursements as wages and include them on each affected employee's W-2 form at the end of the year, meaning that the payments are taxable to employees. As a result of deducting these reimbursements as wages, it's also necessary to withhold the same income taxes, Social Security, Medicare and other taxes that you withhold from employee paychecks. Increasing employee wages to include reimbursements also means that the amount of deductible employment taxes the business pays increases as well.

When you're self-employed and operate as a sole proprietor, or are subject to tax like one because you're the sole member of a limited liability company, deduct the mileage you put on your car when driving to or from an airport for business reasons as a travel expense on your Schedule C. If the air travel relates to a specific client who reimburses you after receiving receipts or other documentation that supports your mileage expense, you can exclude the payment from the self-employment earnings you report on Schedule C, instead of having to include it in income and then take a travel expense deduction for it.