Form 1120-S - Standard Mileage Method for Vehicle Expenses

Employee business expenses can be claimed only by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses.

Generally, the S-corporation reimburses the employee for vehicle expenses incurred when using their personal vehicle for company purposes. Corporate employers may not use the standard mileage rate to compute the vehicle expenses for company-owned vehicles. However, they may use the standard mileage rate in determining the reimbursement to employees for business use of the employee's vehicle. This reimbursement would be considered a business expense deducted on the S-corporation return. Conversely, if the vehicle is owned by the S-corporation, the business is only allowed to deduct actual vehicle expenses (to the extent of business use).

How to Report - Individual Return:

Employees have the option to use either the standard mileage rate OR actual expenses method. If the shareholder is considered an employee, the individual would then complete Form 2106 to deduct the vehicle expenses which exceed the reimbursement, if any. 

To enter unreimbursed employee expenses in your TaxAct® return:

  1. From within your TaxAct return (Online or Desktop) click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
  2. Click Other Adjustments to expand the category, then click National Guard/Reserve member from Form 2106 or Qualified performing Artist or Fee-Basis Government Official from Form 2106.
  3. The program will continue with the interview questions to enter the appropriate information.

This method is not available to corporations or partnerships; however, it may be available to the individual shareholder or partner for their individual return depending on the circumstances. For confirmation on this, please contact the IRS at 800-829-1040.