Running an S Corporation often means blending personal and business activities — especially when it comes to using your personal vehicle for work purposes. A common (and smart) question business owners ask is: Can my S Corporation reimburse me for using my personal car? The short answer is yes — but there are important rules you need to follow. In this guide, we’ll break it down with a clear Q&A format so you know exactly what’s allowed and how to maximize your reimbursements properly.
Can an S Corporation Reimburse a Personal Vehicle?
Yes.
An S Corporation can reimburse you for using your personal car for business purposes. However, you must use what’s called an Accountable Plan — a reimbursement arrangement that meets IRS requirements to avoid the payment being treated as taxable income.
What Is an Accountable Plan?
An Accountable Plan is an IRS-approved system for reimbursing employees (including owner-employees) for business expenses without counting those payments as wages.
To qualify, the plan must meet three requirements:
- Business Connection: The expense must have a clear business purpose.
- Substantiation: You must document the expense (mileage logs, dates, purpose, etc.).
- Return of Excess: Any reimbursement over the documented amount must be returned to the company.
Without an accountable plan, any reimbursement would have to be included in your W-2 wages and be subject to payroll taxes.
How Should Mileage Be Tracked?
When your personal vehicle is used for business, accurate mileage tracking is crucial. You’ll need to record:
- Date of each trip
- Starting point and destination
- Business purpose
- Miles driven
Many people use apps like MileIQ or QuickBooks Self-Employed to automate this process, but a written logbook is also perfectly acceptable. The key is detailed, contemporaneous records—don’t guess at the end of the year.
What Reimbursement Rate Should I Use?
Most companies use the IRS standard mileage rate.
For 2025, the standard mileage rate is 70 cents per mile (check for yearly updates).
Alternatively, you can reimburse based on actual vehicle expenses (gas, maintenance, insurance, etc.), but this method requires significantly more record-keeping and calculations.
For simplicity, using the IRS standard mileage rate is the most common and audit-safe method.
Is the Reimbursement Taxable?
No, as long as you have an Accountable Plan and follow the IRS rules, the reimbursement is not taxable income. It’s a business expense for the S Corporation and doesn’t show up as additional wages for you.
However, if you don’t properly substantiate your mileage or don’t have an accountable plan, then the payments must be reported as wages — meaning both you and the corporation would owe additional taxes.
Can I Also Deduct Vehicle Expenses Personally?
No.
Once your S Corporation reimburses you under an accountable plan, you cannot deduct those same expenses on your personal tax return.
Double-dipping is not allowed, and doing so can trigger IRS penalties.
How Does the Reimbursement Affect the S Corporation’s Taxes?
Vehicle reimbursements made under an accountable plan are classified as business expenses for the S Corporation.
This means:
- It reduces the corporation’s taxable income.
- It does not increase payroll tax liabilities (since the reimbursement is not considered wages).
It’s a win-win when structured correctly.
Common Mistakes to Avoid
- Lack of Mileage Logs: Not keeping detailed records can cause reimbursements to be treated as taxable income.
- No Written Accountable Plan: Even a simple plan document is necessary to stay compliant.
- Reimbursing for Personal Trips: Only business miles are reimbursable. Personal use must be excluded.
- Using the Actual Expense Method Incorrectly: If you want to deduct actual expenses, you must allocate properly between personal and business use — often a much more complicated task.
Quick Example
Let’s say you drove 5,000 miles for your S Corporation’s business activities in 2025.
At the IRS mileage rate of 70 cents per mile:
5,000 miles × $0.70 = $3,500 reimbursement
You submit your mileage log to the S Corporation, and the business cuts you a $3,500 check under the accountable plan.
Result:
- You pay no personal taxes on the $3,500.
- The S Corporation gets a $3,500 business deduction.
- Everyone wins — and you stay compliant.
Final Thoughts
If you’re running an S Corporation and using your personal vehicle for work, setting up an Accountable Plan for mileage reimbursement is an essential (and IRS-approved) way to handle it.
Just make sure you document everything carefully, reimburse at the correct rate, and keep business and personal travel clearly separated. Done properly, it’s a smart strategy that can lead to significant tax savings for you and your business.
If you’re unsure how to set up your accountable plan or need help documenting your reimbursements, consulting with a CPA or business advisor can help you stay safe and optimize your tax strategy.